strong organic growth and solid results...note: revenue by industry, product and geography rounded...
TRANSCRIPT
INVESTOR PRESENTATION
Strong organic growth and solid results
FEBRUARY 8, 2019
SEGMENT SPLIT PRODUCTS
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 2
GEOGRAPHIES
Kemira in briefFY2018: REVENUE EUR 2,593 MILLION, OPERATIVE EBITDA EUR 323 MILLION, OPERATIVE EBITDA MARGIN 12.5%, OPERATIVE ROCE 9.8%
◼ 25% Bleaching
and pulping
◼ 20%
Polymers
◼ 20% Other:
e.g. defoamers,
dispersants,
and biocides
◼ 20%
Coagulants
◼ 15%
Sizing
and
strength
Revenue by product category rounded to the nearest 5%
39%
AMERICAS
1.USA
2.Canada
3.Brazil
52%
EMEA
1.Finland
2.Sweden
3.Germany
9%
APAC
1.China
2.South
Korea
3.Thailand
◼ 59%Pulp & Paper
◼ 41%Industry & Water
CUSTOMERS
Several thousand customers
TOP 10 customers are ~25% of revenue
TOP 50 customers are ~50% of revenue
EXAMPLES OF
LARGEST CUSTOMERS
Municipalities, e.g.
Frankfurt, London, New York,
Paris, Shanghai, Singapore
#1 in
water
treatment
in NA and
Europe
#2 in friction reduction in North
American shale oil & gas
#2 globally
Global megatrends favor Kemira
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 3
REGULATION
Safe drinking
water
More stringent
discharge limits
GROWING MIDDLE
CLASS &
URBANIZATION
E-commerce /
online shopping
Higher use of
water, energy,
tissue and board
SCARCITY
OF RESOURCES
Material and
resource
efficiency
Alternative
materials for
single-use plastic
products
Global trends favor Pulp & Paper –capacity additions in bleaching chemicals
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 4
Pulp, board and tissue markets
• Growth driven by e-commerce and growing middle class in APAC
• Above mentioned trends have fueled growth in pulp bleaching, Kemira’s CAGR +6% since 2014
Bleaching chemical capacity additions
• During 2018, we have done debottlenecking in Finland
• In Q3 2018 announced decision to direct bleaching chemical capacity to pulp customers resulting in closure of sodium percarbonate production line in Sweden by the year end
Regulation trends favorable to demand of water treatment chemicals
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 5
Emerging
contaminants
(pharma,
microplastics)
Better
dewatering of
sludge and
phosphorus
recovery
Increased
demand for
water
treatment
chemicals
Stormwater
Overflows
More
efficient
implementation
Water
reuse
More stringent
discharge
limits
REVENUE EUR million
2,229
2,137
2,373 2,363
2,486
2,593
2013 2014 2015 2016 2017 2018
OPERATIVE EBITDAOPERATIVE EBITDA MARGINEUR million
252 253
287
303311
323
11.3%
11.8%12.1%
12.8%12.5% 12.5%
2013 2014 2015 2016 2017 2018
INV E S T OR P RE S E NT A T ION 6
Delivering profitable growth
FE B RUA RY 2019
1,170
1,417 1,457 1,477 1,520
137171
195 198192
2014 2015 2016 2017 2018
REVENUE ANDOPERATIVE EBITDA
REVENUE BYPRODUCT CATEGORY
INV E S T OR P RE S E NT A T ION 7
REVENUE BY CUSTOMERTYPE AND MARKET GROWTH
Pulp & Paper – market leader with solid track record
MARKET ENVIRONMENT REVENUE BY GEOGRAPHIES AND
MARKET GROWTH BY REGION
CUSTOMER EXAMPLES
◼ 55%
EMEA
◼ 30%
Americas
◼ 15%
APAC
◼ 40%
Bleaching
& pulping
◼ 25%
Sizing &
strength
◼ 20%Defoamers,
dispersants,
biocides and
other process
chemicals
◼ 10%
Polymers
◼ 5% Other◼ 40%
Pulp
◼ 20%
Printing &
writing papers
◼ 40%
Board &
tissue
-1-2%2-3%1-2%Market
growth
2-3%0-1%1%Market
growth
Nouryon (pulp) #3
Solenis (paper)* #1
Kemira (pulp and paper) m.s. ~16% #2
Ecolab (paper) #4
Note: Revenue by industry, product and geography rounded to the nearest 5%
FE B RUA RY 2019
* Solenis-BASF combined entity
Kurita (paper) #5
REVENUE BYPRODUCT CATEGORY
INV E S T OR P RE S E NT A T ION 8
REVENUE BY APPLICATIONTYPE AND MARKET GROWTH
Industry & Water – strong positions in chosen categories
REVENUE BY GEOGRAPHIES AND
MARKET GROWTH BY REGION
◼ 40%
Coagulants
◼ 40%
Polymers
◼ 20%
Other
products
such as
defoamers
and biocides
2-3%5-6%2-3%
◼ 50%
EMEA
◼ 45%
Americas
◼ 5%
APAC
◼ 65%
Water treatment
◼ 10%
Other
◼ 25%
Oil & Gas
5-6%3-4%3-4%
WATER TREATMENT
Amsterdam
Barcelona
Frankfurt
London
Oslo
Paris
Stockholm
Los Angeles
Montreal
New York City
Toronto
Melbourne
Shanghai
Singapore
OIL & GAS
Note: Revenue by industry, product and geography rounded to the nearest 5%
Market
growth
Market
growth
CUSTOMER EXAMPLES
FE B RUA RY 2019
924 945 973 1,009 1,016 1,040 1,065 1,073
105 105112 113 117
123 123131
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2017 2018
REVENUE AND OPERATIVE EBITDA ROLLING 12 MONTHS
MARKET ENVIRONMENT
Market share
~30% in coagulants and
~20% in polymers
Main competitors in
coagulants:
• Feralco (Europe)
• Kronos (Europe)
• Chemtrade (NA)
• USAlco (NA)
Market share ~25% in
polymers used in shale
oil & gas
Main peers in polymers
(also in water treatment):
• SNF
• Solenis
• Solvay (only O&G)
MUNICIPAL (40%),
customer examples
INDUSTRIAL (60%),
customer examples
Municipal Industrial
Kemira’s mid- to long-term financial targets
FE B RUA RY 2019 9
Targets 2017 2018 IFRS 16 impact Mid- to long-term target
Revenue EUR 2,486 million
Change +5%
EUR 2,593 million
Change +4%
- Above-the-market growth
Operative EBITDA* 12.5% 12.5% Around +1 %-point 15-17%
Gearing* 59% 62% Around +10 %-points Below 75%
Factors FY 2018 comments
Organic growth through volume and sales price increases Group’s organic growth +7%
Oil & Gas becoming larger share of Group (incl. shale, CEOR and oil sands) Revenue from EUR 126m in 2016 to EUR 242m in 2018
Sales price vs raw material price development Raw material inflation in 2017 and 2018, sales prices
starting to offset raw material cost pressure in 2018
Capex projects – Polymer capacity expansion in Netherlands, AKD Joint
Venture in China, Polymer capacity expansion in the US
Backward integration and growth benefits 2020-21
FINANCIAL TARGETS AND HISTORICAL FIGURES
KEY FACTORS TO WATCH FOR PROFITABILITY IMPROVEMENT
* Targets updated in February 2019 due to IFRS 16 accounting change. 2017-2018 figures are PRE IFRS 16.
INV E S T OR P RE S E NT A T ION
Healthy market growth for Kemira’s relevant markets
2018 2023
Americas EMEA APAC
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 10
Source: Management estimation based on various sources
KEMIRA RELEVANT MARKETEUR billion
PULP & PAPER RELEVANT MARKET EUR billion
INDUSTRY & WATER RELEVANT MARKETEUR billion
2018 2023
Pulp Printing & writing Board & tissue
2018 2023
Water treatment Oil & Gas Other
CAGR:2-3%
CAGR:1-2%
CAGR:3-4%
22
27
109
1713
Dividend proposal EUR 0.53 per share
• Kemira’s dividend policy is to pay a stable and competitive dividend
• Board of Directors’ proposal to the AGM a dividend of EUR 0.53 per share, totaling EUR 81 million
• Kemira has paid dividend every year since listing of shares in 1994
• Kemira offers attractive dividend yield
0.53 0.53 0.53 0.53 0.53 0.53 0.53 0.53
5.8% 4.5% 4.4% 5.4% 4.9% 4.4% 4.6% 5.4%
2011 2012 2013 2014 2015 2016 2017 2018
INV E S T OR P RE S E NT A T ION 11
◼ Dividend per share Dividend yield
FE B RUA RY 2019
*
Kemira’s dividend yield calculated using the share price at year-end
*BoD proposal to the AGM 2019
Our three sustainability priorities
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 12
Sustainable products
and solutions
People and integrity
Responsible operations & supply chain
Ensuring responsible operations
to protect our assets, our
environment, employees,
contractors, customers and
communities
Ensuring compliance with
responsible business practices
in our supply chain
Incorporating sustainability into
our products and solutions
Proactive product stewardship
throughout the products’ lifecycle
Culture and commitment to people
Ensuring compliance with
Kemira Code of Conduct
KPI’S AND TARGETS
• Employee engagement index above industry benchmark
• Leadership development activities 2 per people manager position, cumulative target 1500 by 2020 (2015=0)
• Integrity index continuously increasing
KPI’S AND TARGETS
• Carbon Index 80 by 2020 (Baseline 100 in 2012)
• People safety TRIF 2.0 by 2020
Supplier Sustainability Evaluation
• 90% of direct key suppliers screened through sustainability evaluation through assessments and audits (Baseline 60% in 2017)
KPI’S AND TARGETS
At least 50% of our revenue is generated through products improving customers’ resource efficiency
INVESTOR PRESENTATION
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 13
Latest news andfinancials
Selected highlights in 2018
• Favorable market trends – good global demand in all our business areas – organic growth +7%
• Customer satisfaction and employee engagement improved
• Systematic improvements in operational excellence to meet changing market dynamics
• Second half of the year was better than the first
• Investments – acquisition/JV in China and CEOR polymer capacity ramp-up proceeding, decision made to increase emulsion polymer capacity in the US
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 14
Strong organic growth and solid results in 2018Organic growth +7%
• All businesses grew, growth driven mainly by higher sales prices
• Especially Oil & Gas chemicals was strong, growth over 40%
Operative EBITDA +4%
• Profitability impacted by currencies in H1 and higher raw material prices – passing on variable cost increases continues
Earnings per share +13%
• Increase driven by higher operative EBITDA and lower items affecting comparability
Dividend
• Board of Directors proposes a dividend ofEUR 0.53 per share
EUR million
(except ratios)
FY
2018
FY
2017
Δ%
Revenue 2,592.8 2,486.0 +4
Operative EBITDA 323.1 311.3 +4
of which margin 12.5% 12.5% -
Operative EBIT 173.8 170.3 +2
of which margin 6.7% 6.9% -
Net profit 95.2 85.2 +12
EPS, EUR 0.58 0.52 +13
Dividend per share,
proposal by the BoD, EUR 0.53 0.53 0
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 15
Pulp & Paper – good organic growth, profitability unsatisfactory in paper chemicals
Organic growth +6% in 2018
• Good volume growth in bleaching and sizing
• Growth driven also by higher sales prices, especially in caustic soda
Operative EBITDA
• Sales price increases started to compensate higher raw material prices
• Currency impact EUR -8 million vs prior year
Capacity additions to fuel volume growth
• Deal to acquire 80% of Chinese AKD manufacturing plant completed, final construction proceeding, production ramp-up expected in H2
• Multimillion JV in South Korea announced in January 2019 for additional dry polymer capacity –investment supports also growth in Industry & Water
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 16
REVENUE EUR million
OPERATIVE EBITDA AND EBITDA-% EUR million
1,477 1,520
2017 2018
198 192
2017 2018
12.6%13.4%
Industry & Water – profitable growth in water treatment and oil & gasOrganic growth +9% in 2018
• Growth driven mainly by Oil & Gas
• Water treatment also grew driven by pricing as we continue to pass on inflationary pressure
Operative EBITDA increased by 15%
• EBITDA improvement driven mainly by higher sales prices
• Currency impact EUR -6 million vs 2017
Growth investments
• CEOR polymer capacity expansion in Netherlands under construction, ramp-up in H2 2019
• New EUR 60 million investment into expansion of emulsion polymers capacity in the US, in commercial operation beginning of 2021
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 17
REVENUE EUR million
OPERATIVE EBITDA AND EBITDA-% EUR million
1,009 1,073
2017 2018
114131
2017 2018
12.3%11.3%
Organic growth continued driven by pricing
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 18
Q4 2018
Group’s organic growth +3%
• Pulp & Paper +4%, Industry & Water +2%
• Sales volumes grew in Pulp & Paper and Oil & Gas chemicals
– Volume growth negative due to equipment delivery in Oil & Gas in 2017 and weak water treatment volumes as focus has been on profitable contracts
72.878.9 80.8
70.0 69.077.1
84.5 80.769.4
80.289.0 84.5
12.5%13.4%13.6%
11.7%11.3%12.5%
13.6%12.7%
13.3%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018
637 -3%+1% 0 662
Q4 2017 Salesvolumes
Salesprices
Currencyimpact
Acquisitions Q4 2018
+6%
REVENUE AND ORGANIC REVENUE GROWTH
(Y-ON-Y) EUR million
OPERATIVE EBITDA AND OPERATIVE EBITDA
MARGIN EUR million
12.8%
11.3%
Operative EBITDA +5%, margin 12.8%
• Good growth in absolute EBITDA, margin improved slightly as sales prices more than compensated higher raw material prices
Earnings per share +5%
• Reported tax rate for the year was 23%
12.4%
Pulp & Paper – good growth driven by pricing and volume• Organic growth +4% driven by high demand for caustic soda and bleaching chemicals
• Operative EBITDA 13.1% – higher sales prices were not enough to compensate increasing raw material prices
362 361 365 369 372 369 363373 369 376
385 390
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018
47.9 49.3 51.846.3 46.0 47.8 48.5
55.4
42.7 45.452.3 51.2
13.2%13.7% 14.2%
12.6%12.4%13.0%13.4%14.9%
11.6%12.1%13.6%13.1%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 19
+3% +1% -4% -2% 0% +1% +2% +5%
REVENUE AND ORGANIC REVENUE GROWTH
(Y-ON-Y) EUR million
OPERATIVE EBITDA AND OPERATIVE EBITDA
MARGIN EUR million
+5% +6% +7% +4%
Industry & Water – record-high Q4 EBITDA
• Growth was muted due to equipment deal in comparison period as well as change in customer mix and related timing of deliveries
• Oil & Gas has grown +92% from EUR 126 million in 2016 to EUR 242 million in 2018
– Organic growth over 30% in Q4 driven by pricing excl. the equipment deal made in 2017
220 227 231 228 238 248 259 264245
272 284 271
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018
24.929.6 29.0
23.7 22.929.3
36.0
25.3 26.6
34.8 36.733.3
11.3%13.1%12.5%
10.4%9.6%
11.8%
13.9%
9.6%10.9%
12.8%12.9%12.3%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 20
-7% -5% 0% +9% +15%-5% +6% +20% +14%
REVENUE AND ORGANIC REVENUE GROWTH
(Y-ON-Y) EUR million
OPERATIVE EBITDA AND OPERATIVE EBITDA
MARGIN EUR million
+11% +11% +2%
SALES PRICE VS VARIABLE COST TREND
-200
-150
-100
-50
0
50
100
150
200
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Brent oil, USD Sales prices* Variable costs*
SALES PRICES AND VARIABLE COSTS(CHANGE Y-O-Y)
95
-3 -10
-16-20
-10
-2 -2
114
8
-9-18
-26 -23-16
-43
11
23
4742
37
-18-23
-23 -13
0
1613
13
2636
38
29
-40
-30
-20
-10
0
10
20
30
40
50
60
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018
Net impact on EBITDA (sales prices-variable costs)
Sales prices
Variable costs
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 21
Net impact of sales price & variable costs positive
* 12-month rolling change vs previous year in EUR million
EUR millionEUR million
VARIABLE COST SPLIT 2018EUR 1.6 billion
TOP 10 RAW MATERIALSBY SPEND
1. Sodium hydroxide (caustic soda)*
2. Acrylonitrile (OD)
3. Aluminium hydrate
4. Colloidal silica dispersion*
5. Amines (OD)
6. Petroleum solvents (OD)
7. Acrylic acid (OD)
8. Alpha olefin (OD)
9. Acrylic ester (OD)
10. Fatty acid
Top 10 account for 50%of Kemira’s raw material spend
OD = Oil & gas derivative
* Mainly trading materials
INV E S T OR P RE S E NT A T ION 22
EXPOSURE TO OIL RELATEDRAW MATERIALS
Kemira’s variable cost split and top raw materials
◼ 30%Oil & gas
related
◼ 70%Not oil
related
◼ 70%Raw materials
◼ 15%Electricity & energy
◼ 15%Logistics
FE B RUA RY 2019
Outlook for 2019
“Kemira expects its operative EBITDA (2018: EUR 323.1 million) to increase from the prior year on a comparable basis, excluding the impact of IFRS 16 accounting change.”
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 23
EUR
million
2014 2015 2016 2017 2018 2019
outlook
Operative
EBITDA
253 287 303 311 323 Increase
Operative EBITDA figures for 2014-2018 are ”pre IFRS-16”.
• IFRS 16 will affect primarily the accounting for Kemira Group’s operating leases
• On December 31, 2018, Group’s operating lease commitments were EUR 205 million
• Operating lease expenses are replaced by the depreciation of the right-of-use assets and interest cost associated with lease liability. As a result, the impact on net profit is immaterial
• The adaptation of IFRS 16 will increase total amount of balance sheet by approximately EUR 120 million, and EBITDA will increase by around EUR 30 million leading to EBITDA margin increase of approximately 1 percentage point
• IFRS 16 will also have an impact on key figures such as net debt and gearing
• No restatement of prior years – instead we will provide enough detail during the year for analysis
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 24
2019 – IFRS 16 impacting financials –EBITDA margin lifted by around 1 %-point
EUR million
(except ratios)
FY
2018
Estimated impact
in 2019, around
Operative EBITDA 323.1 +30
of which margin 12.5% +1 %-point
Operative EBIT 173.8 Small positive
Impact on opening balance sheet
EUR million
(except ratios)
Dec 31, 2018
PRE-IFRS 16
Impact on
opening balance
sheet, around
Balance sheet 2,764 +120
Gearing 62% +10%-points
Majority of contracts with fixed annual pricingPulp & Paper – Contract types and pricing terms on high level
• Length – Around 95% of contracts are 1-year or longer / only 5% are spot deals
• Pricing – Around 70% fixed / 30% formula or spot pricing
Industry & Water – Contract types and pricing terms
• Length – Around 60% of contracts are 1-yr or longer / 40% spot deals
• Pricing – Around 60% fixed / 40% formula or spot pricing, incl. Oil & Gas where contracts are either formula or spot based
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 25
Currencies
Currency exchange rates had around EUR -70 million impact on revenue andEUR -14 million impact on the operative EBITDA in 2018 compared to 2017.
Guidance: 10% change in our main foreign currencies would approximately haveEUR 15 million impact on operative EBITDA on an annualized basis.
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 26
◼ 44% EUR
◼ 10% Others
KEMIRA REVENUE DISTRIBUTION 2018 KEMIRA COST DISTRIBUTION 2018
◼ 2% SEK
◼ 3% CNY
◼ 4% CAD
◼ 35% USD
◼ 9 % Others
◼ 5 % CNY
◼ 5 % CAD
◼ 7 % SEK
◼ 30 % USD
◼ 44 % EUR◼ 2% BRL
Development of selected key figures
9.8% 9.9% 9.7% 9.8%
2015 2016 2017 2018
642 634694
741
2015 2016 2017 2018
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 27
ALL KEY FIGURES IN EUR MILLION EXCEPT RATIOS
248271
205 210
2015 2016 2017 2018
104 118 124 106
78 95 66
44
2015 2016 2017 2018
213
CASH FLOW FROM OPERATIONS CAPITAL EXPENDITURE EXCL. ACQUISITIONS
NET DEBT AND LEVERAGE RATIOOPERATIVE RETURN ON CAPITAL EMPLOYED
2.32.2 2.22.1
◼ Growth capex
182190
150
• Bleaching chemicals – new chlorate plant in Brazil and new chlorate line in Finland
• Polymers – capacity additions in Italy, UK and Netherlands
• Sizing chemicals – capacity additions due to integration of acquisitions
60 59 53
58 65 53
95 66
44
2016 2017 2018
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 28
2018 CAPEX WAS LOWER DUE TO TIMING OF INVESTMENT PROJECTS
CAPEX guidance 180-220 MEUR in 2019
Expansion Improvement Maintenance
190
CAPITAL EXPENDITURE EXCLUDING
ACQUISITIONSEUR million and share of revenue
213
CAPEX FOCUS IN CORE PRODUCT GROUPS
SINCE 2016
CAPEX GUIDANCE
• In 2019, capital expenditure estimated to increase from 2018 and be approximately EUR 180-220 million, including
– Expansion of Oil & Gas CEOR polymers in Netherlands
– New capacity expansion in Oil & Gas polymers in the US
– Completion for the new Pulp & Paper AKD JV site in China
9.0%
7.6%
5.8%
150
NET DEBT / OPERATIVE EBITDA AND GEARING
42% 41% 42%
54% 54%59%
62%
2012 2013 2014 2015 2016 2017 2018
GROSS DEBT MATURITY PROFILE,
END OF DECEMBER 2018 EUR 886 MILLION
(Cost of debt 1.9%)
INV E S T OR P RE S E NT A T ION 29
Debt portfolio is well diversified
1.9x
2.1x 2.1x2.2x
1.8x
2.2x
532m 694m456m 486m 634m642m
NET DEBT
OPERATIVE EBITDA
FE B RUA RY 2019
249m 311m252m 253m 303m287m 323m
741m
2.3x
156
0
50
100
150
200
250
300
350
400
450
2019 2020 2021 2022 2023 2024 2025
Bilaterals Bonds Undrawn RCF Undrawn Bilaterals Others
150
200
400
240
57
90
40
Key figures and ratios – 5-year summary
EUR million (except ratios) 2014 2015 2016 2017 2018
Revenue 2,136.7 2,373.1 2,363.3 2,486.0 2,592.8
Operative EBITDA 252.9 287.3 302.5 311.3 323.1
of which margin 11.8% 12.1% 12.8% 12.5% 12.5%
Operative EBIT 158.3 163.1 170.1 170.3 173.8
of which margin 7.4% 6.9% 7.2% 6.9% 6.7%
Cash flow from operations 74.2 247.6 270.6 205.1 210.2
Capital expenditure, excluding acq. 140.6 181.7 212.6 190.1 150.4
Gearing at period-end 42 54 54 59 62
Inventories 197 207 217 224 284
Personnel at period-end 4,248 4,685 4,818 4,732 4,915
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 30
Per share figures – 5-year summary2014 2015 2016 2017 2018
Earnings per share, EUR 0.59 0.47 0.60 0.52 0.58
Cash flow from operating activities per
share, EUR
0.49 1.63 1.78 1.35 1.38
Equity per share, EUR 7.57 7.76 7.68 7.61 7.80
Dividend per share, EUR 0.53 0.53 0.53 0.53 0.53
Share price, EUR, end of period 9.89 10.88 12.13 11.50 9.85
Market capitalization, EUR million
(excl. treasury shares)
1,504 1,654 1,848 1,752 1,502
Number of shares, million
(excl. treasury shares)
152.1 152.1 152.4 152.4 152.4
P/E ratio 16.7 23.3 20.1 22.3 17.0
P/CF ratio 20.2 6.7 6.8 8.5 7.1
P/B ratio 1.3 1.4 1.6 1.5 1.3
Dividend yield, % 5.4 4.9 4.4 4.6 5.4
INV E S T OR P RE S E NT A T ION 31FE B RUA RY 2019
Key figures
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 32
EUR million Q4 2018 Q4 2017 Δ% 2018 2017 Δ%
Revenue 661.8 636.5 +4 2,592.8 2,486.0 +4
Operative EBITDA 84.5 80.7 +5 323.1 311.3 +4
margin 12.8% 12.7% - 12.5% 12.5% -
Operative EBIT 44.8 44.0 +2 173.8 170.3 +2
margin 6.8% 6.9% - 6.7% 6.9% -
Net profit 26.5 25.8 +3 95.2 85.2 +14
Earnings per share, EUR 0.17 0.16 +5 0.58 0.52 +13
Cash flow from operations 88.2 71.4 +24 210.2 205.1 +2
Capex excl. acquisitions 53.2 64.2 -17 150.4 190.1 -21
Net debt 741 694 +7 741 694 +7
NWC ratio 10.2% 9.4% - 10.2% 9.4% -
Operative ROCE % (rolling 12 months) 9.8% 9.7% - 9.8% 9.7% -
Personnel at period-end 4,915 4,732 +4 4,915 4,732 +4
EUR million Q4 2018 Q4 2017 2018 2017
Net profit for the period 27 26 95 85
Total adjustments 59 37 220 204
Change in net working capital 17 18 -51 -34
Finance expenses -6 -6 -25 -25
Income taxes paid -7 -4 -24 -25
Net cash gen. from operating activities 88 71 210 205
Purchases of subsidiaries and acquisit. -44 0 -43 0
Capital expenditure -53 -64 -150 -190
Proceeds from sale of assets 1 2 7 3
Change in long-term loan receivables 5 -5 5 -5
Cash flow after investing activities -3 4 29 13
Cash flow
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 33
KEY FINANCIALS
Pulp & Paper
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 34
*12-month rolling average
EUR million Q4 2018 Q4 2017 Δ% 2018 2017 Δ%
Revenue 390.4 372.8 +5 1,520.2 1,476.9 +3
Operative EBITDA 51.2 55.4 -8 191.7 197.7 -3
margin 13.1% 14.9% - 12.6% 13.4% -
Operative EBIT 24.1 30.9 -22 91.6 104.8 -13
margin 6.2% 8.3% - 6.0% 7.1% -
Operative ROCE*, % 7.8% 9.0% - 7.8% 9.0% -
Capital expenditure (excl. M&A) 28.8 41.1 -30 85.1 138.3 -38
Cash flow after investing activities -13.5 4.4 - 29.9 15.7 +90
KEY FINANCIALS
Industry & Water
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 35
*12-month rolling average
EUR million Q4 2018 Q4 2017 Δ% 2018 2017 Δ%
Revenue 271.5 263.8 +3 1,072.6 1,009.1 +6
Operative EBITDA 33.3 25.3 +32 131.5 113.6 +15
margin 12.3% 9.6% - 12.3% 11.3% -
Operative EBIT 20.8 13.1 +59 82.2 65.5 +25
margin 7.7% 5.0% - 7.7% 6.5% -
Operative ROCE*, % 13.6% 11.0% - 13.6% 11.0% -
Capital expenditure 24.4 23.1 +6 65.3 51.7 +26
Cash flow after investing activities 23.8 8.3 +187 52.5 46.9 +12
FY 2018
Revenue split by country
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 36
USA 27%
Canada 6%
Brazil 3%
Uruguay 2%
Other Americas 1%
Finland 16%Sweden 5%
Germany 5%
Poland 3%
UK 3%
Spain 2%
Other APAC 4%
South Korea 1%
China 4%
Russia 2%
Netherlands 2%
France 2%
Italy 2%
Other EMEA 9%
Norway 1%
INVESTOR PRESENTATION
Pulp & Paper –driving growth as market leader
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 37
Pulp & Paper chemicals market estimated to grow 1-2%
• Pulp & Paper chemicals market drivers
– Hardwood and softwood pulp demand increasing driven by growth of packaging needs (e-commerce, non-plastic solutions), growing tissue demand and lack of recycled fiber
– Demand increase continues for packaging, driven by online shopping, last-mile delivery, product safety and non-plastic solutions
– Growth in tissue demand driven by increasing wealth in emerging countries
– Ongoing digitalization of media drives decline of graphic paper demand
• Growth areas, pulp and board & tissue, represent over 80% of our Pulp & Paper revenue
– Ongoing capacity additions suit well for the need of growing demand
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 38
REVENUE AND OPERATIVE EBITDAEUR million
1,170
1,417 1,457 1,477 1,520
137
171195 198 192
2014 2015 2016 2017 2018
◼ 40%
Pulp
◼ 20%
Printing &
writing papers◼ 40%
Board & tissue
-1-2%2-3%1-2%Market
growth
REVENUE BY CUSTOMER TYPE
Strong demand in pulp market creating growth opportunitiesNew pulp mill projects are driven byincreasing demand for board and tissue
• Food and liquid packaging board isgrowing particularly fast in Asia
• Pulp is produced close to fiber sources andthen shipped to board, paper, and tissue mills or used captively in an integrated mill
• Growth in board = 1 new pulp mill per year
Multiple pulp mill projects realised and expected in Northern Europe creating opportunities for Kemira to grow withthe market
In addition, a few large scale pulp millprojects expected in South America
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 39
Confirmed new capacity /
debottlenecking 2016-2020
Possible new mills 2020-2022
Äänekoski
Kuusankoski
Kuopio
Paltamo
Kemi
Östrand
Värobacka
Svetlogorsk
Steti
Viljandi/Tartto
Vologda
Bratsk ->
Uts-Ilimsk ->
Sveza
Bleaching investment – case Joutseno
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 40
• In Joutseno we doubled our chlorate capacity in Q4 2017
– Excellent timing, pulp production grew simultaneously in Finland
• Multiple pulp mills are located nearby with annual production of over 2Mt
• Part of chlorate production can be also exported in dry format to APAC
EUR 50 MILLION INVESTMENT IN 2017
Acquisition via JV in China
• Agreed to form joint venture with Tiancheng
• NewCo will produce mainly AKD wax and its key raw material fatty acid chloride (FACL)
– AKD is sizing chemical used in board and paper to createresistance against liquid absorption
– NewCo also plans to produce coagulants for water treatment
• Kemira strengthens its position and secures supply of key raw material for AKD wax
• Kemira will have 80% of NewCo
– Investment for 80% around EUR 55 million
• Ramp-up after completion investments
– Good contribution to P&L after ramp-up
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 41
AKD WAX SUPPLIED FROM YANZHOU, CHINA TO KEMIRA SITES GLOBALLY
We leverage acquisition synergieswith our global production
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 42
Telêmaco
Borba
Washougal
St. CatharinesHelsingborg
Joutseno
Nanjing
Hallam
Gunsan
Pasuruan
Wellgrow
Krems
TarragonaYanzhou
NewCo
Acquisition in China is excellentstrategic fitAcquired asset fulfills our key criteria for acquisitions
GROWTH – End-products in growing markets
APAC – Enables profitable growth in APAC
SUPPLY – Backward integr. & self-sufficiency (FACL)
SUSTAINABILITY – FACL from renewable raw material
LOCATION – Close to our existing production
PROFITABILITY – Accretive after ramp-up
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 43
END-PRODUCTSWHERE AKD WAXIS USED
Pulp & Paper
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 44
TECHNOLOGY AND MARKET LEADER
Value chain part covered by Kemira
RAW
MATERIALSINTERMEDIATES PRODUCTS APPLICATIONS
CUSTOMER
INDUSTRIESCUSTOMERS
Electricity
Sodium chloride(salt)
Crude tall oil
Cationic monomer
Acrylonitrile
Acrylic acid
Olefins
Fatty acids
Maleic anhydride
Sulfur
Tall oil rosin
AKD Wax
Isomerized olefinsAcrylamide
Sodium chlorate
Hydrogen peroxide
Polymers
Defoamers
Coagulants
Biocides
Sizing
Strength Additives
Surface additives
Colorants
Sulfuric acid
Pulping
Bleaching
Retention
Wet-end processcontrol
WQQM
Sizing
Strength
Surface treatment
Coloring
Pulp
Packagingand board
Printingand writing
Tissue
All the major global paper and pulp producers
MAIN COMPETITORS: Solenis, Nouryon, Ecolab, Kurita, SNF
INVESTOR PRESENTATION
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 45
Industry & Water -stronger platformfor profitable growth
Industry & Water relevant chemicals market estimated to grow 3-4%
• Demand for water treatment chemicals expected to increase due to
– Higher demand for water driven by industrial growth and population growth
– More stringent discharge limits for waste water
– Better dewatering of sludge
– Phosphorus recovery
– Water reuse
• Higher demand for Oil & Gas solutions expected
– Shale friction reducer market expected to grow due to higher energy demand and increasing number of wells fracked
– Oil sands operators face regulatory requirements for their tailings treatment
– Chemical Enhanced Oil Recovery lucrative in certain fields due to better yield from existing reservoirs
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 46
947 956906
1,009 1,073
116 116 107 114131
2014 2015 2016 2017 2018
REVENUE AND OPERATIVE EBITDAEUR million
◼ 65%
Water treatment
◼ 10%
Other◼ 25%
Oil & Gas
2-3%5-6%2-3%Market
growth
REVENUE BY APPLICATION
2014-2016 figures are pro forma; combination of Municipal & Industrial and
Oil & Mining segments
Kemira is a market leader in water treatment chemistry
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 47
Serving most European cities
Drinking water plants and Wastewater
plants
No of ship-to countries ~ 80
No of ship-to points ~ 9 000
No of ship-from points ~ 30-40
I&W EMEA customer locations. Dot size
correlates with ship-to volumes.
Not representative for East Europe due to roll-
out of Kemira ERP system in H2/2018.
Major re-fit of the European water laws
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 48
W A T E R F R A M E W O R K D I R E C T I V E
Environmental
Quality
Standards
Directive
Ground-water
Directive
Floods
Directive
Urban Waste
Water
Treatment
Directive
Drinking Water
Directive
Marine
Strategy
Framework
Directive
Nitrates
Directive
Bathing Water
Directive
C I R C U L A R E C O N O M Y P A C K A G E
Sewage
Sludge
Directive
Industrial
Emissions
Directive
Environmental
Impact
Assessment
Directive
Fertilizer
Directive
New regulation
Critical Raw
Materials
Water
Re-use
Plastics
Strategy
(microplastics)
Proposal Proposal
Evaluation Proposal
Fitness check
Oil & Gas growing fast
Growing market demand with our selective market diversification assuring growth
Kemira’s offering
• Process efficiencies: polymers that reduce energy consumption by 60% in shale oil fields
• Cost reduction: higher concentrated liquids that make offshore oil recovery more cost effective (CEOR)
• Addressing environmental regulations: tailing treatment in oil sands
New innovative technologies driving expansion
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 49
0
50
100
150
200
250
300
2013 2014 2015 2016 2017 2018
REVENUE IN OIL & GASEUR million
REVENUE SPLIT
◼ 15%Other
◼ 65%Shale fracking
◼ 20%Oil sands and
Chemical Enhanced
Oil Recovery Figures rounded to closest 5%
Oil
price
Organic growth
>30%
LTM = Last Twelwe Months ending June 2018
CEOR-polymer deal with Chevron
• Strategically important multi-year Chemical Enhanced Oil Recovery deal with Chevron
• EUR 30 million polymer capacity addition, announced in October 2017, progressing well
• CEOR market size approximately EUR 1 billion of which EUR 500 million accessible to Kemira
• Market growth estimated to be 5% driven by enhanced production from existing fields
• Kemira is committed to provide enhanced solutions for challenging water intensive environments and technologies that can enable CEOR
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 50
Industry & Water
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 51
TECHNOLOGY AND MARKET LEADER IN WATER TREATMENT AS WELLAS IN NICHE APPLICATIONS IN OIL & GAS
MAIN COMPETITORS
Coagulants: mainly local small companies, Feralco, USALCO, Kronos, PVS,
Polymers: SNF, Solvay, Ecolab, SolenisValue chain part covered by Kemira
INTERMEDIATES PRODUCTS APPLICATIONS SALES CHANNELS CUSTOMERS
Acrylonitrile
Acrylic acid
Sulfuric acid
Hydrochloric acid
Aluminium hydrate
Iron ore
Pickling liquor
Copperas
Various monomers
Acrylamide
Cationic monomer
Polymers (EPAM, DPAM)
Al Coagulants
Fe Coagulants
Dispersants &antiscalants
Biocides
Emulsifiers
Defoamers
Formulations
Raw water & waste water treatment
Sludge treatment
Friction reduction
Enhanced oil recovery
Tailings treatment
Mining processes
Direct sales
Distributor/reseller
Service companies
RAW
MATERIALS
Municipalities
Private operators
Industrial customers
Pumpers
Oil & Gas operators
Service companies
Mine operators
INVESTOR PRESENTATION
Appendix
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 52
SHAREHOLDERS ON JANUARY 31, 2019
% OF SHARES
1. Oras Invest 18.2%
2. Solidium (owned by State of Finland) 15.8%
3. Varma Mutual Pension Insurance Company 3.4%
4. Ilmarinen Mutual Pension Insurance Comp. 2.1%
5. Kemira Oyj 1.8%
Total number of shares 155,342,557
Foreign ownership of shares 27.5%
Total number of shareholders 34,357
KEMIRA BOARD OF DIRECTORS
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 53
Kemira – largest shareholders andBoard of Directors
JARI PAASIKIVI
Chairman
Member since 2012
Oras Invest Oy, CEO
KERTTU
TUOMAS
Vice Chairman
Member
since 2010
WOLFGANG
BÜCHELE
Member in
2009-2012 and
since 2014
KAISA
HIETALA
Member
since 2016
TIMO
LAPPALAINEN
Member since
2014
SHIRLEY
CUNNINGHAM
Member
since 2017
Kemira’s Management Board
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 54
Jukka Hakkila, Chief Legal Officer, acts as secretary of Management Board and Board of Directors.
PULP & PAPER
Kim Poulsen
OPER. EXCELLENCE
Esa-Matti Puputti
INDUSTRY & WATER
Antti Salminen
CFO
Petri Castrén
HUMAN RESOURCES
Eeva Salonen
CTO
Matthew R. Pixton
PRESIDENT AND CEO
Jari Rosendal
Priority KPI+Target Performance Comments Progress
Sustainable products
and solutions
Product sustainability
Share of revenue from products used for
use-phase resource efficiency. At least
50% of Kemira’s revenue generated
through products improving customers’
resource efficiency.
15 new R&D projects were started and 9 projects were
commercialized in 2018 to improve customer’s resource
efficiency.
Responsible
operations and supply
chain
Workplace safety
Achieve zero injuries on long term;
TRIF* 2.0 by end of 2020.
Our health and safety performance improved in 2018
compared to 2017 and is consistent with 2016
performance. There was a decline in severity and
permanent injuries which is responding to ongoing
management commitment, progressive safety messaging
and an overall improvement in safety culture.
Climate change
Kemira Carbon Index ≤ 80 by end of
2020 (2012 = 100). This KPI is reported
once a year.
Carbon Index decreased mainly due to higher share of
purchased electricity from renewable and low carbon
sources and in some extent through energy efficienc
improvements.
Supplier Management
% of direct key suppliers screened
through sustainability assessments and
audits (cumulative %). The target
includes 5 sustainability audits for
highest risk** suppliers every year, and
cumulatively 25 by 2020.
Sustainability screening of key suppliers progressed well
as planned for 2018. In total 32 sustainability assessments
and 3 Ethical on-site audits were conducted during the
year. Overall target of 25 Ethical audits is behind the target
but is compensated by active screening via assessments
of key suppliers with good performance.
.
Corporate responsibility performance Q4 2018
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 55
49%
51%
Baseline average2016-2017
2018
5.8
7.2
3.43.9
3.5
2.0
14 15 16 17 18 Target2020
10088 91 93
86 85 83 80
12 13 14 15 16 17 18 Target20
55%69%
90%
811
25
0
10
20
30
40
50
0%
20%
40%
60%
80%
100%
Baseline 2017 2018 Target 2020
% of key suppliers # of audits (cumul.)
* TRIF = Number of Total Recordable Injury Frequency per million hours, Kemira + contractor, year-to-date
** Suppliers with lowest sustainability assessment score
Priority KPI+target Performance CommentsProgress
People and
integrity
Employee engagement index based on
Voices@Kemira biennial survey
The index at or above the external
industry norm. The participation rate
target in Voices@Kemira is 75% or
above.
Action planning is ongoing at manager level. Intensive
company wide strategy communication and engagement is
ongoing.
Leadership development activities
provided, average
Two leadership development activities
per people manager position during
2016-2020, the cumulative target is 1,500
by 2020.
Above target level for activities consisting of the best
practice 70-20-10 model for Learning and Development
(on-the-job learning 70%,
coaching and mentoring 20%, and development programs
10%). Total by the end of 2018 is already 1,533; the target
for 2020 is 1,500.
Integrity index
KPI to measure compliance with the
Kemira Code of Conduct. The target is to
maintain the Integrity Index level above
the external industry norm.
To comply with EU's General Data Protection Regulation
(GDPR), data processing activities were extensively
reviewed and documented, and a privacy impact
assessment process was implemented. Privacy notices,
data processing agreements and global privacy policy were
created. A mandatory online training course on GDPR was
assigned to over 300 Kemira employees who work in roles
that involve the processing of personal data while general
awareness-building was continued to all Kemira
employees.
Corporate responsibility performance Q4 2018
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 56
58%67% 71%75%
85% 84%
2013 2015 2017 2018
Engagement Participation
494
1,036
1,533 1,500
2016 2017 2018 Target 2020
87%
84%
2018
Integrity Index Participation
Important information about financial figuresKemira provides certain financial performance measures (alternative performance measures) on non-GAAP basis. Kemira believes that alternative performance measures, such as organic growth*, EBITDA, operative EBITDA, cash flow after investing activities, and gearing followed by capital markets and Kemira management, provide useful information of its comparable business performance and financial position. Selected alternative performance measures are also used as performance criteria in remuneration.
Kemira’s alternative performance measures should not be viewed in isolation to the equivalent IFRS measures and alternative performance measures should be read in conjunction with the most directly comparable IFRS measures. Definitions of the alternative performance measures can be found in the Definitions of the key figures in this report, as well as at www.kemira.com > Investors > Financial information.
All the figures in this interim report have been individually rounded and consequently the sum of individual figures may deviate slightly from the sum figure presented.
* Revenue growth in local currencies, excluding acquisitions and divestments
FE B RUA RY 2019 INV E S T OR P RE S E NT A T ION 57