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Kemira cmd-2013-presentation

Kemira is restructuring to become a pure-play water company focused on growth markets. It has divested non-water businesses and reorganized operations around key regions. Fit for Growth initiatives have improved profitability and are expected to deliver €60 million in savings by 2014. Kemira is also turning around its Municipal & Industrial segment through a new customer segmentation model, manufacturing optimization, and reduced SKUs. The company aims for an operative EBIT margin of 10% in Municipal & Industrial by 2014.

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Delivering a profitable water pure-play Kemira Capital Markets Day 2013, September 10 Wolfgang Büchele, President and CEO
Structural changes starting to deliver results Food and pharmaceuticals business divestment Sachtleben divestment Stringent capital allocation LEAN manufacturing 3F acquisition New organization structure Fit for Growth Segment roles: growth and/or cash focus -28% +35% Net debt Equity value Kemira Capital Markets Day 2013 2 Performance management system Compensation structure Process architecture Lean operation Q2 2012 Result CMD 2013
Managing businesses from their growth regions Oil & Mining management based in Atlanta, US Municipal & Industrial management relocating from Helsinki to Frankfurt Paper management relocating from Helsinki to Hong Kong EMEA Paper management relocating from Helsinki to Frankfurt Kemira Capital Markets Day 2013 3
68 70 72 74 76 78 80 82 2012 Q4 2012 Q1 2013 Q2 2013 0 200 400 600 800 1,000 1,200 1,400 1,600 Jan 2012 Jun 2012 Dec 2012 Mar 2013 Jun 2013 Differentiated products together with balanced wet and dry shale portfolio driving revenue recovery in Oil & Mining 15% reduction in total number of US oil (+17%) and gas (-56%) rigs in 2013 compared to January 2012 Oil & Mining revenue increasing sequentially despite decreased oil and gas drilling activity Differentiated products share of revenue increasing to 82% +6% +5% # of Oil rigs in the US* EUR million 82% # of Gas rigs in the US* *) Source: Baker Hughes International Kemira Capital Markets Day 2013 4
Restructuring initiatives improving profitability in Municipal & Industrial 0 100 200 300 400 500 600 700 800 2010 2011 2012 1-6 2013 7.1% 5.7% 7.1% 9.2% 644 665 687 343 Others Polymers Coagulants Operative EBIT margin Revenue, EUR million Kemira Capital Markets Day 2013 5
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 No change in outlook for 2013 or financial targets for 2014 and 2016 Kemira Capital Markets Day 2013 6
Fit for Growth helping to deliver 2013 profit target* Fit for Growth savings expected to be EUR 15-20 million higher in H2 2013 vs H2 2012 Input prices trending up *) Revenue in local currencies, excl. divestments 0%-5% growth vs 2012, Operative EBIT +15% vs 2012 2012-2013 Propylene price trend Kemira Capital Markets Day 2013 7 0.40 0.50 0.60 0.70 0.80 850 1000 1150 1300 1/12 2/12 3/12 4/12 5/12 6/12 7/12 8/12 9/12 10/1211/1212/12 1/13 2/13 3/13 4/13 5/13 6/13 EU (EUR/MT, ICIS) NA (USD/pound, CMAI) 3 7 9 10 0 5 10 15 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Fit for Growth savings, EUR million
External indicators show stable economic development in EMEA and NAFTA, uncertainty in emerging markets Kemira early warning dashboard Kemira Capital Markets Day 2013 8 1. Lead time is the estimated time (months) between movement of indicator vs. resultant 2. Average new order value (3 months rolling) Indicators Status Trend Change Lead1 Overall WTI crude oil futures (9/13) 6 OECD + Emerging market bus. confidence index (6/13) 4 FOEX China BHKP pulp (9/13) 4 Chicago fed nat. activity (7/13) 8 EMEA IFO manufacturing business expectations (8/13) 6 Eurozone PMI survey (8/13) 6 NA S&P 500 index (9/13) 4 ISM business supplier deliveries (8/13) 6 SA Brazil industry production % growth (6/13) 6 Brazil company leading indicator (6/13) 6 APAC Major 5 Asia companies leading indicator (6/13) 8 China containerized freight index (8/13) 2 Contracting: indicator has decreased for at least 3 consecutive months Expanding: indicator has increased for at least 3 consecutive months Normal: indicator moves within standard deviation corridor Above: indicator moves above standard deviation corridor Below: indicator moves below standard deviation corridor Trend
Operative EBIT margin target of 10% in 2014 Fixed cost inflation is expected to be compensated through additional benefits from LEAN manufacturing roll-out, further M&I turnaround measures and growth Q2 operative EBIT 2013 Excluding one off expenses in Q2 2013 Fit for Growth full run rate M&I restructuring Additional efficiency measures (Vaasa, BSC, 3F synergies) Average quarterly EBIT, including all the announced efficiency measures 2013-2015 40 554 15 5 Kemira Capital Markets Day 2013 9 10% Quarterly operative EBIT bridge, EUR million 7%
Capital allocation focusing on growth markets and product lines Targeted payback time for new greenfield investments is max. 7 years and max. 5 years for capacity additions on existing products Focus on Paper in China, strengthening Oil & Mining in mature markets, South America, Middle East and Africa 65% 35% 6.0% 5.0% 2012 2016e Capex split average 2010-2012 Targeted capex split 2016 Capex-to-sales ratio 30% 70% Kemira Capital Markets Day 2013 10 2013-2015 Differentiated products Commodity products
• Current 36% gearing means EUR 280 million headroom against the targeted <60% gearing • Strict M&A criteria for focused growth – Must strengthen our market position and/or our technologies/competencies – EBIT accretive in second full year after closing • 3F acquisition demonstrates Kemira’s M&A strategy – Accessing technologies lacking in the portfolio (e.g. monomers) – Accelerating geographical expansion in order to shorten the strategic path (e.g. dry polyacrylamides in the US) Acquisitions expected to contribute to growth target 2013-2015 Kemira Capital Markets Day 2013 11
Positioning based on 2 years performance Portfolio focus shifting from commodity to differentiated business Kemira Capital Markets Day 2013 12 2013-2015 Revenue growth Profitability O&M SA O&M APAC M&I SA M&I APAC M&I NAFTA O&M EMEA Paper SA O&M NAFTA Paper NAFTA Paper EMEA Paper APAC CSEvaluating exit options M&I EMEA
Portfolio restructuring improving return on capital employed June 2013 Ambition in 2016 Goodwill 520m Lower Other intangible assets* 58m Unchanged Property, plant and equipment* 650m >30% higher Investment in associates 2 Unchanged NWC 11.3% 11%-11.5% Operative EBIT margin 1-6 2013 7.3% ~11% Operative ROCE, rolling 12 months 10.4% >15% 5% capex to sales target in 2016 LEAN manufacturing and SKU reduction Fit for Growth and continuous efficiency measures *) Prepayments (see note 13 in the Financial Statements 2012) of EUR 111 million are excluded from Kemira operative ROCE. 13 2013-2015 Kemira Capital Markets Day 2013
Innovation focusing on Paper and Oil & Mining Technology Management Board targeting 50% reduction in development times for ”R” and ”D” projects Dedicated global team and structured process to drive ideation R&D projects per New Product Development stage Development Scale-up Kemira Capital Markets Day 2013 14 2015-2017 Paper Oil & Mining Municipal & Industrial ChemSolutions Paper Oil & Mining Municipal & Industrial ChemSolutions
Heading towards remote control and combining waste water treatment with energy generation Remote control and monitoring of water management: serving industries from a central location Kemira Capital Markets Day 2013 15 Energy and clean water from waste by Microbial Fuel Cell assisted water treatment 2017-2020
Renewed revolving credit facility further improves financial position and secures future growth financially Debt per June, 2013 Gross debt: EUR 565 million Net Debt: EUR 425 million Net Debt/Annualized operative EBITDA YTD 2013: 1.7 Gross debt maturing in 2013 relates mainly to commercial papers issued on the Finnish markets 4.3% 1.7% 2.0% 2.0% 1.6% 1.7% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 2008 2009 2010 2011 2012 6/2013 -500 -400 -300 -200 -100 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 >2022 Gross debt Undrawn EUR 400 million 5+1+1 year Revolving Credit Facility Debt maturity profile, EUR million Kemira average interest rate (at the end of the period) Kemira Capital Markets Day 2013 16
Dividend policy remains unchanged Dividend policy is to distribute a dividend that is 40%-60% of Kemira’s operative net profit Dividend yield has on average been over 4% in 2005-2012 (leading yield in the European chemical sector) Kemira Capital Markets Day 2013 17 *) 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 June, 2013 53% 39% 38% 42% 36% 37% 61% 60% 59% 69% 2009 2010* 2011 2012 2013** Gearing Payout ratio
Cultural change supporting Kemira’s transformation into water quality and quantity management pure-play 2013-2015 Focus 2017-2020 Expand Be recognized industry and technology leader in chosen target markets 2015-2017 Accelerate Grow through new products & services and accelerate expansion in emerging markets Achieve a sustainable position in all target markets 2012-2013 Redesign Reach target profitability by implementing “Fit for Growth” Best-in-class in its ability to leverage global performance culture, talents and operations Build a strong employer brand to attract and retain leadership and expert talents Establish a performance and innovation driven culture that fosters collaboration, learning and organizational agility Building blocks for a high performing organization in place: Clear accountabilities, performance management system, process architecture Kemira Capital Markets Day 2013 18
Increased focus on efficiency and savings Kemira Capital Markets Day 2013, September 10 Michael Löffelmann, SVP restructuring
EUR 60 million Fit for Growth savings in 2014 >45 60 10 19 Savings impact 2012 Savings impact 2013 Savings impact 2014 Expected savings Realized savings Zero loss of identified Fit for Growth savings, implementation timeline sharpened EUR million Kemira Capital Markets Day 2013 20
Offsetting Kemira’s fixed cost inflation through ongoing cost savings driven by continuous improvement process Implementing LEAN to continue focus on cost efficiencies Why is LEAN important for Kemira? Reduce complexity Reduce costs Increase competitiveness Kemira Capital Markets Day 2013 21
LEAN savings of EUR 6 million already implemented Kemira Capital Markets Day 2013 22 5 0.5 0.5 6 Helsingborg Botlek Bradford Total EUR million
5. Remote operators 4. Self-loading 3. LEAN lab & in-process analysis Global roll-out of standardized LEAN savings modules Kemira Capital Markets Day 2013 23 2. Material handling benchmark 1. Weighing & filling
Strong focus on implementation discipline Kemira Capital Markets Day 2013 24 Enhanced implementation • Higher and constant drive to achieve results • Continuous identification of savings • Greater sense of urgency Resources • Closer interaction and follow-up • Full time LEAN resources • Dedicated manufacturing optimization resources Tools • Action based with financial tracking • Standardized LEAN tools • Additional training for sites Delivering high performance driven culture
Accelerating the turnaround in Municipal & Industrial Kemira Capital Markets Day 2013, September 10 Frank Wegener, President, Municipal & Industrial
Fit for Growth has started to improve profitability Revenue EUR million Operative EBIT % Municipal & Industrial targets cross-the-cycle operative EBIT margin of 10% in 2014 1) Targeted Fit for Growth savings above EUR 20 million 2) New organization and customer segmentation leading to more than EUR 5 million additional savings 3) Further benefits from manufacturing network optimization, SKU reduction and R&D portfolio improvements 161 165 174 178 150 155 160 165 170 175 180 Q1 2012 Q1 2013 Q2 2012 Q2 2013 3.5% 5.2% 6.9% 8.9% 0% 2% 4% 6% 8% 10% Q1 2012 Q1 2013 Q2 2012 Q2 2013 +2% +2% +49% +29% Kemira Capital Markets Day 2013 26
Municipal & Industrial faces challenges • Municipal business under margin pressure in emerging markets • Coagulant business facing local competition - players of very different sizes and business drivers 608 644 665 68711% 9% 7% 6% 0% 2% 4% 6% 8% 10% 12% 560 580 600 620 640 660 680 700 2009 2010 2011 2012 Revenue Operative EBIT margin EUR million Kemira Capital Markets Day 2013 27
Historic business model New business model New business model and organization to address the challenging business environment Kemira Capital Markets Day 2013 28 • Sales model with simplified organization and channel strategy • Headcount reduction of ~50 employees • R&D focus in line with strategy, portfolio reduced by 40% • Uniform service approach with limited customer segmentation • Sales force weighted more towards direct sales vs. distribution sales • Global geographical focus with scattered manufacturing footprint • Limited focus on production technology • World class coagulant footprint focusing on mature markets • Over 1,000 SKU’s • Number of SKU’s reduced by 50%
Segmented customer business model increasing profitability Historic model – unsegmented New model with two customer segments Kemira Capital Markets Day 2013 29 Kemira offering: • Reliable delivery and effective treatment • Tailor made solutions • Fast time to resolution • Technical support Paying for: Reliable delivery and effective treatment Value and performance Price>9,000 municipal and industrial customers buying coagulants and polymers >9000 customers >4500 customers >4500 customers Paying for: Effective treatment Paying for: Faster resolution Some technical support and Tailored solutions with immediate resolution, tech support part of offering
Securing competitive position through manufacturing network consolidation Fit for Growth measures will be fully implemented by the end of Q2 2014 • 6 sites closed, closure of 2 sites and 2 production plants under implementation • 2 sites to be closed only after new Tarragona coagulant site is on stream (delayed to Q1 2014) Further manufacturing optimization through economies of scale and the use of industrial by-products Additional rationalization expected in NAFTA *) Europoort and Krems (production plants), Lauterburg, Sevilla, Flix, Tarragona old, St. Petersburg, Houston, Savannah, Xoxla, Camacari, Romania Coagulants New product sites Sites and production plants closed or decided to be closed Kemira Capital Markets Day 2013 30
Legislation and regulatory enforcement driving demand • Sludge treatment (dewatering) in Europe • China expected to invest EUR 50 billion to water in the next 5 years R&D to secure competitive offering and meet long term growth opportunities Positive regulatory developments Market growth expected to accelerate in 2016 2.6 3.0 3.4 1.6 1.8 1.9 3.4 3.8 4.4 2012 2016 2020 Coagulants Others Polymers Kemira Capital Markets Day 2013 31
Accelerating the turnaround in Municipal & Industrial Streamlined business model focused on maximizing cash flow generation Focus on mature markets, capture selected growth opportunities in APAC Structural profitability improvement through reduction of complexity, customer segmentation and organizational optimization Selective application and production process development as well as new products paving the way to a sustainable future 43 21 BUSINESS INNOVATIONGEOGRAPHY EFFICIENCY Kemira Capital Markets Day 2013 32
Innovating for growth Kemira Capital Markets Day 2013, September 10 Dr. Heidi Fagerholm, CTO
Research Center network focusing on competence development and regional business support Shanghai, China • Paper applications • Tissue • TCS Espoo, Finland • Fundamental • Paper research • M&I • TCS Sao Paolo, Brazil • Minerals & Metals • TCS Atlanta, GA, USA • Oil & Gas • Minerals & Metals • Paper • TCS TCS = Technical Customer Service & Production Support Kemira Capital Markets Day 2013 34 Total personnel 250 Patent families ~350
• Increase in total portfolio value by 50% from 2013 to 2020 • Increase in cross-regional participation across R&D projects • Every second project has an external research partner • FTE per project growing more than 50% due to increased focus R&D portfolio aligned with strategy Kemira Capital Markets Day 2013 35
Innovation focusing on Paper and Oil & Mining Development Scale-up Share of R&D projects in various NPD stages Commercialization Paper O&M M&I CS M&I CS Paper O&M SWEET* Other *) Center of water efficiency excellence Kemira Capital Markets Day 2013 36
40 106 140 0 20 40 60 80 100 120 140 160 2011 2012 2013** Innovation sales target EUR 250 million in 2016 Kemira innovation sales*, EUR million *) Sales from new products or existing products for new applications launched within the previous 5 years **) Annualized Jan-Jun 2013 innovation sales Fennobond strength Fennobind binders Kemflite, control & monitoring KemFlow friction reducer KemFlow biocide Kemira Capital Markets Day 2013 37 O&M Paper M&I Tagged antiscalants Guar replacement Green friction reducer Rheology modifiers Performic acid Next Fennobind generation New innovation areas Targeting to double innovation driven sales from 5% in 2012 to ~10% of total sales in 2016
Polymers account for 50% of Kemira’s differentiated product revenue • Case study: Polymers in flocculation and sludge dewatering • Technical benefits for customer include improved reject water quality and increased solid content of sludge • Global polymer market growing from EUR 7 billion to EUR 10 billion in 2020 • Kemira targeting faster than market growth Kemira Capital Markets Day 2013 38
Benefits for customer: • Significant cost savings via decreased binder demand on coating application • Increased sustainability through reduced dependency on oil-based chemistry Kemira: • Creating innovative high performance binder concept based on future chemistry and application requirements The global binder market for paper and board is EUR 2.5 billion Case Fennobind – For better printability in Paper & Board Innovative binder concept Kemira Capital Markets Day 2013 39 Fennobind Particle diameter 46 nm
Shale Gas & Oil Slick water and hybrid fracturing uses Kemira’s polymers Kemira Capital Markets Day 2013 40 Dynamic Market • Gas and oil rigs dependent on energy price • Guar price volatility - key for gel fracturing (wet shale) New fracturing technologies developing rapidly to improve production rates • Hybrid fracturing • New and rapidly developing fracturing methods Implications • Increased water usage → water reuse → high brine • Polymer usage increasing in wet shale • Polymer as a co-treatment/replacement for gel fracturing 200 600 1,000 1,400 1/12 6/12 12/12 3/13 6/13 # of Oil rigs in the US* # of Gas rigs in the US* 0 5 10 15 20 25 30 12/07 6/08 12/08 6/09 12/09 6/10 12/10 6/11 12/11 6/12 12/12 Guar price index India NCDEX guar split quotations
Removing volatility in shale gas and oil through technology and applications Kemira Capital Markets Day 2013 41 Innovation driven growth • Customer focused • New products wet and dry shale • Portfolio of products for water management Accomplishments • New slick water friction reducers for high brines • Products with improved handling → inversion, cold temperature • Guar replacement under development • Growing multi-product patented portfolio • Applications knowledge & partnerships with key service companies Relevant market size for polymers is about EUR 1 billion Gel Feature Guar Kemira Proppant carrying capacity + + Stability of gel + + Gel formation/Breaking + + Ease of hydration - + Friction reduction properties - + Reduction of number of products to use for hybrid fracs - +
Benefits for customer: • Deeper water, more complex wells, and the optimization of mature fields • Scale risk minimization, differentiated detection, peace of mind & production optimization. • Lower costs (Capex flexibility, optimized chemical usage, lower equipment & operational costs) Kemira: • New tagged antiscalant technology based on proven polymeric scale inhibitor Relevant market size for downhole scale squeeze business is about EUR 100 million Success Story Tagged antiscalants for Oil & Gas stimulation and production Kemira Capital Markets Day 2013 42
Building a culture of innovation throughout the organization Innovation Community to inspire people, to stimulate creativity and to create enablers for an innovation culture Training to enhance innovation capabilities Create measurable success criteria for innovation work ”Innovate today for a prosperous tomorrow” Kemira Capital Markets Day 2013 43
44 Appendix Kemira Capital Markets Day 2013, September 10 Kemira Capital Markets Day 2013
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 45Kemira Capital Markets Day 2013
46 Differentiated products expected to grow substantially above the market, commodity products focusing on efficiency improvements Differentiated products • Growth target substantially above the market • Driven by innovation and expertise • Higher margins due to higher value to the customer • Flexible manufacturing capabilities with sufficient scale • Higher barriers to entry (technology) 781 843 879 455 0 200 400 600 800 1000 2010 2011 2012 1-6 2013 Commodity products • Targeting growth, but slightly lower than the market • Maximizing profitability and cash flow by leveraging existing capacity Differentiated products revenue, EUR million 1380 1365 1362 675 0 500 1000 1500 2010 2011 2012 1-6 2013 Commodity products revenue, EUR million
Kemira revenue split into differentiated and commodity products Differentiated product lines Commodity product lines %-of total revenue in 1-6 2013 Polymers Sizing and strength Defoamers, dispersants, biocides and other process chemicals Coagulants Bleaching chemicals Formic acid and derivatives Miscellaneous commodity products* Paper 10% 20% 15% 5% 25% - 25% M&I 20% - 5% 65% - - 10% O&M 55% - 25% 5% - - 15% Chem- Solutions - - - - - 80% 20% Kemira 20% 10% 10% 25% 15% 5% 15% 47 *) Mainly sodium percarbonate, colorants, acrylamide, inorganic salts and acids as well as caustic soda Kemira Capital Markets Day 2013
Mature markets continue to stay important in all segments 621 646 1-6 2012 1-6 2013 EMEA (57% of total revenue) Revenue, EUR million 345 333 1-6 2012 1-6 2013 NAFTA (29% of total revenue) Revenue, EUR million 38% 37% 1-6 2012 1-6 2013 GM % 39% 39% 1-6 2012 1-6 2013 GM % Kemira Capital Markets Day 2013 48
Kemira Group operative EBIT bridge, EUR million 0 10 20 30 40 50 60 70 80 90 100 1-6 2012 Sales volumes Sales prices Variable costs Fixed costs Currency impact Others, incl. acquisitions and divestments 1-6 2013 74.6 17.0 82.24.23.2-9.1 -5.7 -2.0 49 EUR million Kemira Capital Markets Day 2013
Good balance between sales and raw material prices Kemira sales prices vs variable costs *) 12-month rolling change in EUR million vs corresponding period in previous year, 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* 50 EUR million Kemira Capital Markets Day 2013
”Fit for Growth” full EUR 60 million impact 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 > EUR 45 million • Expected cost savings impact in operative EBIT 2014 EUR 60 million ”Fit for Growth” status Q2 2013, EUR million >45 60 10 19 0 10 20 30 40 50 60 70 Savings impact 2012 Savings impact 2013 Savings impact 2014 Expected savings Realized savings Kemira Capital Markets Day 2013 51
”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 Kemira Capital Markets Day 2013 52
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. Kemira Capital Markets Day 2013 53
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 Kemira Capital Markets Day 2013 54
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%) Kemira Capital Markets Day 2013 55
Oil & Mining sales volume increase offset by sales price decline 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 Kemira Capital Markets Day 2013 56
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 Kemira Capital Markets Day 2013 57
Kemira capital expenditure 0 20 40 60 80 100 120 140 160 2008 2009 2010 2011 2012 1-6 2013 EUR million Expansion Maintenance and improvement 134 56 98 76 69 109 Kemira Capital Markets Day 2013 58
Net working capital ratio Kemira ambition is to keep net working capital ratio* between 11%-11.5% 14.1% 13.3% 11.3% 13.4% 12.8% 11.3% 9% 11% 13% 15% 2008 2009 2010 2011 2012 1-6 2013 *) Rolling 12-month average Kemira Capital Markets Day 2013 59
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 Kemira Capital Markets Day 2013 60 *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.
Market and product specifications 61 Kemira Capital Markets Day 2013, September 10 Kemira Capital Markets Day 2013
62 Paper and Oil & Mining driving growth Kemira’s relevant market (EUR 27 billion in 2012) will grow to EUR 34 billion in 2020 (CAGR 3.3%)Paper: Growing above market, targeting wet-end chemistry market leadership O&M: Growing above market M&I: Improving profitability, maximizing cash ChemSolutions: Maximizing cash by a product driven business model Source: Management estimation based on various sources 7.7 9.3 7.7 9.5 9.4 13.2 2.0 2.3 2012 2020 2012' 2020' O&MPaper 2.4% ChemSolutionsM&I 4.3% 2.7% 1.8% Business focus
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% Kemira Capital Markets Day 2013 63
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 Kemira Capital Markets Day 2013 64
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 Kemira Capital Markets Day 2013 65
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 Kemira Capital Markets Day 2013 66
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 Kemira Capital Markets Day 2013 67
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 Kemira Capital Markets Day 2013 68
Kemira cmd-2013-presentation

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Kemira cmd-2013-presentation

  • 1.
    Delivering a profitable water pure-play KemiraCapital Markets Day 2013, September 10 Wolfgang Büchele, President and CEO
  • 2.
    Structural changes startingto deliver results Food and pharmaceuticals business divestment Sachtleben divestment Stringent capital allocation LEAN manufacturing 3F acquisition New organization structure Fit for Growth Segment roles: growth and/or cash focus -28% +35% Net debt Equity value Kemira Capital Markets Day 2013 2 Performance management system Compensation structure Process architecture Lean operation Q2 2012 Result CMD 2013
  • 3.
    Managing businesses fromtheir growth regions Oil & Mining management based in Atlanta, US Municipal & Industrial management relocating from Helsinki to Frankfurt Paper management relocating from Helsinki to Hong Kong EMEA Paper management relocating from Helsinki to Frankfurt Kemira Capital Markets Day 2013 3
  • 4.
    68 70 72 74 76 78 80 82 2012 Q4 2012Q1 2013 Q2 2013 0 200 400 600 800 1,000 1,200 1,400 1,600 Jan 2012 Jun 2012 Dec 2012 Mar 2013 Jun 2013 Differentiated products together with balanced wet and dry shale portfolio driving revenue recovery in Oil & Mining 15% reduction in total number of US oil (+17%) and gas (-56%) rigs in 2013 compared to January 2012 Oil & Mining revenue increasing sequentially despite decreased oil and gas drilling activity Differentiated products share of revenue increasing to 82% +6% +5% # of Oil rigs in the US* EUR million 82% # of Gas rigs in the US* *) Source: Baker Hughes International Kemira Capital Markets Day 2013 4
  • 5.
    Restructuring initiatives improvingprofitability in Municipal & Industrial 0 100 200 300 400 500 600 700 800 2010 2011 2012 1-6 2013 7.1% 5.7% 7.1% 9.2% 644 665 687 343 Others Polymers Coagulants Operative EBIT margin Revenue, EUR million Kemira Capital Markets Day 2013 5
  • 6.
    2013 Revenue (local currencies andexcl. 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 No change in outlook for 2013 or financial targets for 2014 and 2016 Kemira Capital Markets Day 2013 6
  • 7.
    Fit for Growthhelping to deliver 2013 profit target* Fit for Growth savings expected to be EUR 15-20 million higher in H2 2013 vs H2 2012 Input prices trending up *) Revenue in local currencies, excl. divestments 0%-5% growth vs 2012, Operative EBIT +15% vs 2012 2012-2013 Propylene price trend Kemira Capital Markets Day 2013 7 0.40 0.50 0.60 0.70 0.80 850 1000 1150 1300 1/12 2/12 3/12 4/12 5/12 6/12 7/12 8/12 9/12 10/1211/1212/12 1/13 2/13 3/13 4/13 5/13 6/13 EU (EUR/MT, ICIS) NA (USD/pound, CMAI) 3 7 9 10 0 5 10 15 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Fit for Growth savings, EUR million
  • 8.
    External indicators showstable economic development in EMEA and NAFTA, uncertainty in emerging markets Kemira early warning dashboard Kemira Capital Markets Day 2013 8 1. Lead time is the estimated time (months) between movement of indicator vs. resultant 2. Average new order value (3 months rolling) Indicators Status Trend Change Lead1 Overall WTI crude oil futures (9/13) 6 OECD + Emerging market bus. confidence index (6/13) 4 FOEX China BHKP pulp (9/13) 4 Chicago fed nat. activity (7/13) 8 EMEA IFO manufacturing business expectations (8/13) 6 Eurozone PMI survey (8/13) 6 NA S&P 500 index (9/13) 4 ISM business supplier deliveries (8/13) 6 SA Brazil industry production % growth (6/13) 6 Brazil company leading indicator (6/13) 6 APAC Major 5 Asia companies leading indicator (6/13) 8 China containerized freight index (8/13) 2 Contracting: indicator has decreased for at least 3 consecutive months Expanding: indicator has increased for at least 3 consecutive months Normal: indicator moves within standard deviation corridor Above: indicator moves above standard deviation corridor Below: indicator moves below standard deviation corridor Trend
  • 9.
    Operative EBIT margintarget of 10% in 2014 Fixed cost inflation is expected to be compensated through additional benefits from LEAN manufacturing roll-out, further M&I turnaround measures and growth Q2 operative EBIT 2013 Excluding one off expenses in Q2 2013 Fit for Growth full run rate M&I restructuring Additional efficiency measures (Vaasa, BSC, 3F synergies) Average quarterly EBIT, including all the announced efficiency measures 2013-2015 40 554 15 5 Kemira Capital Markets Day 2013 9 10% Quarterly operative EBIT bridge, EUR million 7%
  • 10.
    Capital allocation focusingon growth markets and product lines Targeted payback time for new greenfield investments is max. 7 years and max. 5 years for capacity additions on existing products Focus on Paper in China, strengthening Oil & Mining in mature markets, South America, Middle East and Africa 65% 35% 6.0% 5.0% 2012 2016e Capex split average 2010-2012 Targeted capex split 2016 Capex-to-sales ratio 30% 70% Kemira Capital Markets Day 2013 10 2013-2015 Differentiated products Commodity products
  • 11.
    • Current 36%gearing means EUR 280 million headroom against the targeted <60% gearing • Strict M&A criteria for focused growth – Must strengthen our market position and/or our technologies/competencies – EBIT accretive in second full year after closing • 3F acquisition demonstrates Kemira’s M&A strategy – Accessing technologies lacking in the portfolio (e.g. monomers) – Accelerating geographical expansion in order to shorten the strategic path (e.g. dry polyacrylamides in the US) Acquisitions expected to contribute to growth target 2013-2015 Kemira Capital Markets Day 2013 11
  • 12.
    Positioning based on2 years performance Portfolio focus shifting from commodity to differentiated business Kemira Capital Markets Day 2013 12 2013-2015 Revenue growth Profitability O&M SA O&M APAC M&I SA M&I APAC M&I NAFTA O&M EMEA Paper SA O&M NAFTA Paper NAFTA Paper EMEA Paper APAC CSEvaluating exit options M&I EMEA
  • 13.
    Portfolio restructuring improvingreturn on capital employed June 2013 Ambition in 2016 Goodwill 520m Lower Other intangible assets* 58m Unchanged Property, plant and equipment* 650m >30% higher Investment in associates 2 Unchanged NWC 11.3% 11%-11.5% Operative EBIT margin 1-6 2013 7.3% ~11% Operative ROCE, rolling 12 months 10.4% >15% 5% capex to sales target in 2016 LEAN manufacturing and SKU reduction Fit for Growth and continuous efficiency measures *) Prepayments (see note 13 in the Financial Statements 2012) of EUR 111 million are excluded from Kemira operative ROCE. 13 2013-2015 Kemira Capital Markets Day 2013
  • 14.
    Innovation focusing onPaper and Oil & Mining Technology Management Board targeting 50% reduction in development times for ”R” and ”D” projects Dedicated global team and structured process to drive ideation R&D projects per New Product Development stage Development Scale-up Kemira Capital Markets Day 2013 14 2015-2017 Paper Oil & Mining Municipal & Industrial ChemSolutions Paper Oil & Mining Municipal & Industrial ChemSolutions
  • 15.
    Heading towards remotecontrol and combining waste water treatment with energy generation Remote control and monitoring of water management: serving industries from a central location Kemira Capital Markets Day 2013 15 Energy and clean water from waste by Microbial Fuel Cell assisted water treatment 2017-2020
  • 16.
    Renewed revolving creditfacility further improves financial position and secures future growth financially Debt per June, 2013 Gross debt: EUR 565 million Net Debt: EUR 425 million Net Debt/Annualized operative EBITDA YTD 2013: 1.7 Gross debt maturing in 2013 relates mainly to commercial papers issued on the Finnish markets 4.3% 1.7% 2.0% 2.0% 1.6% 1.7% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 2008 2009 2010 2011 2012 6/2013 -500 -400 -300 -200 -100 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 >2022 Gross debt Undrawn EUR 400 million 5+1+1 year Revolving Credit Facility Debt maturity profile, EUR million Kemira average interest rate (at the end of the period) Kemira Capital Markets Day 2013 16
  • 17.
    Dividend policy remainsunchanged Dividend policy is to distribute a dividend that is 40%-60% of Kemira’s operative net profit Dividend yield has on average been over 4% in 2005-2012 (leading yield in the European chemical sector) Kemira Capital Markets Day 2013 17 *) 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 June, 2013 53% 39% 38% 42% 36% 37% 61% 60% 59% 69% 2009 2010* 2011 2012 2013** Gearing Payout ratio
  • 18.
    Cultural change supportingKemira’s transformation into water quality and quantity management pure-play 2013-2015 Focus 2017-2020 Expand Be recognized industry and technology leader in chosen target markets 2015-2017 Accelerate Grow through new products & services and accelerate expansion in emerging markets Achieve a sustainable position in all target markets 2012-2013 Redesign Reach target profitability by implementing “Fit for Growth” Best-in-class in its ability to leverage global performance culture, talents and operations Build a strong employer brand to attract and retain leadership and expert talents Establish a performance and innovation driven culture that fosters collaboration, learning and organizational agility Building blocks for a high performing organization in place: Clear accountabilities, performance management system, process architecture Kemira Capital Markets Day 2013 18
  • 19.
    Increased focus on efficiencyand savings Kemira Capital Markets Day 2013, September 10 Michael Löffelmann, SVP restructuring
  • 20.
    EUR 60 millionFit for Growth savings in 2014 >45 60 10 19 Savings impact 2012 Savings impact 2013 Savings impact 2014 Expected savings Realized savings Zero loss of identified Fit for Growth savings, implementation timeline sharpened EUR million Kemira Capital Markets Day 2013 20
  • 21.
    Offsetting Kemira’s fixed cost inflation throughongoing cost savings driven by continuous improvement process Implementing LEAN to continue focus on cost efficiencies Why is LEAN important for Kemira? Reduce complexity Reduce costs Increase competitiveness Kemira Capital Markets Day 2013 21
  • 22.
    LEAN savings ofEUR 6 million already implemented Kemira Capital Markets Day 2013 22 5 0.5 0.5 6 Helsingborg Botlek Bradford Total EUR million
  • 23.
    5. Remote operators 4. Self-loading 3. LEAN lab& in-process analysis Global roll-out of standardized LEAN savings modules Kemira Capital Markets Day 2013 23 2. Material handling benchmark 1. Weighing & filling
  • 24.
    Strong focus onimplementation discipline Kemira Capital Markets Day 2013 24 Enhanced implementation • Higher and constant drive to achieve results • Continuous identification of savings • Greater sense of urgency Resources • Closer interaction and follow-up • Full time LEAN resources • Dedicated manufacturing optimization resources Tools • Action based with financial tracking • Standardized LEAN tools • Additional training for sites Delivering high performance driven culture
  • 25.
    Accelerating the turnaround in Municipal& Industrial Kemira Capital Markets Day 2013, September 10 Frank Wegener, President, Municipal & Industrial
  • 26.
    Fit for Growthhas started to improve profitability Revenue EUR million Operative EBIT % Municipal & Industrial targets cross-the-cycle operative EBIT margin of 10% in 2014 1) Targeted Fit for Growth savings above EUR 20 million 2) New organization and customer segmentation leading to more than EUR 5 million additional savings 3) Further benefits from manufacturing network optimization, SKU reduction and R&D portfolio improvements 161 165 174 178 150 155 160 165 170 175 180 Q1 2012 Q1 2013 Q2 2012 Q2 2013 3.5% 5.2% 6.9% 8.9% 0% 2% 4% 6% 8% 10% Q1 2012 Q1 2013 Q2 2012 Q2 2013 +2% +2% +49% +29% Kemira Capital Markets Day 2013 26
  • 27.
    Municipal & Industrialfaces challenges • Municipal business under margin pressure in emerging markets • Coagulant business facing local competition - players of very different sizes and business drivers 608 644 665 68711% 9% 7% 6% 0% 2% 4% 6% 8% 10% 12% 560 580 600 620 640 660 680 700 2009 2010 2011 2012 Revenue Operative EBIT margin EUR million Kemira Capital Markets Day 2013 27
  • 28.
    Historic business modelNew business model New business model and organization to address the challenging business environment Kemira Capital Markets Day 2013 28 • Sales model with simplified organization and channel strategy • Headcount reduction of ~50 employees • R&D focus in line with strategy, portfolio reduced by 40% • Uniform service approach with limited customer segmentation • Sales force weighted more towards direct sales vs. distribution sales • Global geographical focus with scattered manufacturing footprint • Limited focus on production technology • World class coagulant footprint focusing on mature markets • Over 1,000 SKU’s • Number of SKU’s reduced by 50%
  • 29.
    Segmented customer businessmodel increasing profitability Historic model – unsegmented New model with two customer segments Kemira Capital Markets Day 2013 29 Kemira offering: • Reliable delivery and effective treatment • Tailor made solutions • Fast time to resolution • Technical support Paying for: Reliable delivery and effective treatment Value and performance Price>9,000 municipal and industrial customers buying coagulants and polymers >9000 customers >4500 customers >4500 customers Paying for: Effective treatment Paying for: Faster resolution Some technical support and Tailored solutions with immediate resolution, tech support part of offering
  • 30.
    Securing competitive positionthrough manufacturing network consolidation Fit for Growth measures will be fully implemented by the end of Q2 2014 • 6 sites closed, closure of 2 sites and 2 production plants under implementation • 2 sites to be closed only after new Tarragona coagulant site is on stream (delayed to Q1 2014) Further manufacturing optimization through economies of scale and the use of industrial by-products Additional rationalization expected in NAFTA *) Europoort and Krems (production plants), Lauterburg, Sevilla, Flix, Tarragona old, St. Petersburg, Houston, Savannah, Xoxla, Camacari, Romania Coagulants New product sites Sites and production plants closed or decided to be closed Kemira Capital Markets Day 2013 30
  • 31.
    Legislation and regulatoryenforcement driving demand • Sludge treatment (dewatering) in Europe • China expected to invest EUR 50 billion to water in the next 5 years R&D to secure competitive offering and meet long term growth opportunities Positive regulatory developments Market growth expected to accelerate in 2016 2.6 3.0 3.4 1.6 1.8 1.9 3.4 3.8 4.4 2012 2016 2020 Coagulants Others Polymers Kemira Capital Markets Day 2013 31
  • 32.
    Accelerating the turnaroundin Municipal & Industrial Streamlined business model focused on maximizing cash flow generation Focus on mature markets, capture selected growth opportunities in APAC Structural profitability improvement through reduction of complexity, customer segmentation and organizational optimization Selective application and production process development as well as new products paving the way to a sustainable future 43 21 BUSINESS INNOVATIONGEOGRAPHY EFFICIENCY Kemira Capital Markets Day 2013 32
  • 33.
    Innovating for growth KemiraCapital Markets Day 2013, September 10 Dr. Heidi Fagerholm, CTO
  • 34.
    Research Center networkfocusing on competence development and regional business support Shanghai, China • Paper applications • Tissue • TCS Espoo, Finland • Fundamental • Paper research • M&I • TCS Sao Paolo, Brazil • Minerals & Metals • TCS Atlanta, GA, USA • Oil & Gas • Minerals & Metals • Paper • TCS TCS = Technical Customer Service & Production Support Kemira Capital Markets Day 2013 34 Total personnel 250 Patent families ~350
  • 35.
    • Increase intotal portfolio value by 50% from 2013 to 2020 • Increase in cross-regional participation across R&D projects • Every second project has an external research partner • FTE per project growing more than 50% due to increased focus R&D portfolio aligned with strategy Kemira Capital Markets Day 2013 35
  • 36.
    Innovation focusing onPaper and Oil & Mining Development Scale-up Share of R&D projects in various NPD stages Commercialization Paper O&M M&I CS M&I CS Paper O&M SWEET* Other *) Center of water efficiency excellence Kemira Capital Markets Day 2013 36
  • 37.
    40 106 140 0 20 40 60 80 100 120 140 160 2011 2012 2013** Innovationsales target EUR 250 million in 2016 Kemira innovation sales*, EUR million *) Sales from new products or existing products for new applications launched within the previous 5 years **) Annualized Jan-Jun 2013 innovation sales Fennobond strength Fennobind binders Kemflite, control & monitoring KemFlow friction reducer KemFlow biocide Kemira Capital Markets Day 2013 37 O&M Paper M&I Tagged antiscalants Guar replacement Green friction reducer Rheology modifiers Performic acid Next Fennobind generation New innovation areas Targeting to double innovation driven sales from 5% in 2012 to ~10% of total sales in 2016
  • 38.
    Polymers account for50% of Kemira’s differentiated product revenue • Case study: Polymers in flocculation and sludge dewatering • Technical benefits for customer include improved reject water quality and increased solid content of sludge • Global polymer market growing from EUR 7 billion to EUR 10 billion in 2020 • Kemira targeting faster than market growth Kemira Capital Markets Day 2013 38
  • 39.
    Benefits for customer: •Significant cost savings via decreased binder demand on coating application • Increased sustainability through reduced dependency on oil-based chemistry Kemira: • Creating innovative high performance binder concept based on future chemistry and application requirements The global binder market for paper and board is EUR 2.5 billion Case Fennobind – For better printability in Paper & Board Innovative binder concept Kemira Capital Markets Day 2013 39 Fennobind Particle diameter 46 nm
  • 40.
    Shale Gas &Oil Slick water and hybrid fracturing uses Kemira’s polymers Kemira Capital Markets Day 2013 40 Dynamic Market • Gas and oil rigs dependent on energy price • Guar price volatility - key for gel fracturing (wet shale) New fracturing technologies developing rapidly to improve production rates • Hybrid fracturing • New and rapidly developing fracturing methods Implications • Increased water usage → water reuse → high brine • Polymer usage increasing in wet shale • Polymer as a co-treatment/replacement for gel fracturing 200 600 1,000 1,400 1/12 6/12 12/12 3/13 6/13 # of Oil rigs in the US* # of Gas rigs in the US* 0 5 10 15 20 25 30 12/07 6/08 12/08 6/09 12/09 6/10 12/10 6/11 12/11 6/12 12/12 Guar price index India NCDEX guar split quotations
  • 41.
    Removing volatility inshale gas and oil through technology and applications Kemira Capital Markets Day 2013 41 Innovation driven growth • Customer focused • New products wet and dry shale • Portfolio of products for water management Accomplishments • New slick water friction reducers for high brines • Products with improved handling → inversion, cold temperature • Guar replacement under development • Growing multi-product patented portfolio • Applications knowledge & partnerships with key service companies Relevant market size for polymers is about EUR 1 billion Gel Feature Guar Kemira Proppant carrying capacity + + Stability of gel + + Gel formation/Breaking + + Ease of hydration - + Friction reduction properties - + Reduction of number of products to use for hybrid fracs - +
  • 42.
    Benefits for customer: •Deeper water, more complex wells, and the optimization of mature fields • Scale risk minimization, differentiated detection, peace of mind & production optimization. • Lower costs (Capex flexibility, optimized chemical usage, lower equipment & operational costs) Kemira: • New tagged antiscalant technology based on proven polymeric scale inhibitor Relevant market size for downhole scale squeeze business is about EUR 100 million Success Story Tagged antiscalants for Oil & Gas stimulation and production Kemira Capital Markets Day 2013 42
  • 43.
    Building a cultureof innovation throughout the organization Innovation Community to inspire people, to stimulate creativity and to create enablers for an innovation culture Training to enhance innovation capabilities Create measurable success criteria for innovation work ”Innovate today for a prosperous tomorrow” Kemira Capital Markets Day 2013 43
  • 44.
    44 Appendix Kemira Capital MarketsDay 2013, September 10 Kemira Capital Markets Day 2013
  • 45.
    Kemira Group revenuegrowth 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 45Kemira Capital Markets Day 2013
  • 46.
    46 Differentiated products expectedto grow substantially above the market, commodity products focusing on efficiency improvements Differentiated products • Growth target substantially above the market • Driven by innovation and expertise • Higher margins due to higher value to the customer • Flexible manufacturing capabilities with sufficient scale • Higher barriers to entry (technology) 781 843 879 455 0 200 400 600 800 1000 2010 2011 2012 1-6 2013 Commodity products • Targeting growth, but slightly lower than the market • Maximizing profitability and cash flow by leveraging existing capacity Differentiated products revenue, EUR million 1380 1365 1362 675 0 500 1000 1500 2010 2011 2012 1-6 2013 Commodity products revenue, EUR million
  • 47.
    Kemira revenue splitinto differentiated and commodity products Differentiated product lines Commodity product lines %-of total revenue in 1-6 2013 Polymers Sizing and strength Defoamers, dispersants, biocides and other process chemicals Coagulants Bleaching chemicals Formic acid and derivatives Miscellaneous commodity products* Paper 10% 20% 15% 5% 25% - 25% M&I 20% - 5% 65% - - 10% O&M 55% - 25% 5% - - 15% Chem- Solutions - - - - - 80% 20% Kemira 20% 10% 10% 25% 15% 5% 15% 47 *) Mainly sodium percarbonate, colorants, acrylamide, inorganic salts and acids as well as caustic soda Kemira Capital Markets Day 2013
  • 48.
    Mature markets continueto stay important in all segments 621 646 1-6 2012 1-6 2013 EMEA (57% of total revenue) Revenue, EUR million 345 333 1-6 2012 1-6 2013 NAFTA (29% of total revenue) Revenue, EUR million 38% 37% 1-6 2012 1-6 2013 GM % 39% 39% 1-6 2012 1-6 2013 GM % Kemira Capital Markets Day 2013 48
  • 49.
    Kemira Group operativeEBIT bridge, EUR million 0 10 20 30 40 50 60 70 80 90 100 1-6 2012 Sales volumes Sales prices Variable costs Fixed costs Currency impact Others, incl. acquisitions and divestments 1-6 2013 74.6 17.0 82.24.23.2-9.1 -5.7 -2.0 49 EUR million Kemira Capital Markets Day 2013
  • 50.
    Good balance betweensales and raw material prices Kemira sales prices vs variable costs *) 12-month rolling change in EUR million vs corresponding period in previous year, 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* 50 EUR million Kemira Capital Markets Day 2013
  • 51.
    ”Fit for Growth”full EUR 60 million impact 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 > EUR 45 million • Expected cost savings impact in operative EBIT 2014 EUR 60 million ”Fit for Growth” status Q2 2013, EUR million >45 60 10 19 0 10 20 30 40 50 60 70 Savings impact 2012 Savings impact 2013 Savings impact 2014 Expected savings Realized savings Kemira Capital Markets Day 2013 51
  • 52.
    ”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 Kemira Capital Markets Day 2013 52
  • 53.
    Key figures andratios 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. Kemira Capital Markets Day 2013 53
  • 54.
    Profitable growth acceleratedin 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 Kemira Capital Markets Day 2013 54
  • 55.
    Profitable growth inMunicipal & 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%) Kemira Capital Markets Day 2013 55
  • 56.
    Oil & Miningsales volume increase offset by sales price decline 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 Kemira Capital Markets Day 2013 56
  • 57.
    ChemSolutions revenue wasimpacted 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 Kemira Capital Markets Day 2013 57
  • 58.
    Kemira capital expenditure 0 20 40 60 80 100 120 140 160 20082009 2010 2011 2012 1-6 2013 EUR million Expansion Maintenance and improvement 134 56 98 76 69 109 Kemira Capital Markets Day 2013 58
  • 59.
    Net working capitalratio Kemira ambition is to keep net working capital ratio* between 11%-11.5% 14.1% 13.3% 11.3% 13.4% 12.8% 11.3% 9% 11% 13% 15% 2008 2009 2010 2011 2012 1-6 2013 *) Rolling 12-month average Kemira Capital Markets Day 2013 59
  • 60.
    Cash flow statement EURmillion 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 Kemira Capital Markets Day 2013 60 *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.
  • 61.
    Market and product specifications 61 Kemira CapitalMarkets Day 2013, September 10 Kemira Capital Markets Day 2013
  • 62.
    62 Paper and Oil& Mining driving growth Kemira’s relevant market (EUR 27 billion in 2012) will grow to EUR 34 billion in 2020 (CAGR 3.3%)Paper: Growing above market, targeting wet-end chemistry market leadership O&M: Growing above market M&I: Improving profitability, maximizing cash ChemSolutions: Maximizing cash by a product driven business model Source: Management estimation based on various sources 7.7 9.3 7.7 9.5 9.4 13.2 2.0 2.3 2012 2020 2012' 2020' O&MPaper 2.4% ChemSolutionsM&I 4.3% 2.7% 1.8% Business focus
  • 63.
    1.5 1.7 1.92.0 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% Kemira Capital Markets Day 2013 63
  • 64.
    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 Kemira Capital Markets Day 2013 64
  • 65.
    Oil & Miningsegment - 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 Kemira Capital Markets Day 2013 65
  • 66.
    Oil & Miningsegment - 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 Kemira Capital Markets Day 2013 66
  • 67.
    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 Kemira Capital Markets Day 2013 67
  • 68.
    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 Kemira Capital Markets Day 2013 68