strong earnings improvement in q1...operative ebitda margin 14.8% • strong operational improvement...

JANUARY-MARCH 2019

Strong earnings improvement in Q1

JARI ROSENDAL, PRESIDENT AND CEO PETRI CASTRÉN, CFOAPRIL 26, 2019

Selected operational highlights in Q1 2019

• Organic growth continued – market environment fairly good

• Profitability improved clearly –capacity utilization rates remained good

• Investment projects proceeding well

A P RIL 26 , 2019 Q1 2019 RE S ULT S 2

Key financial highlights

Organic growth +2%

• Sales prices increased in all areas of our businesses

Operative EBITDA +38% to margin of 14.8%

• Favorable combination of increasing sales prices and moderate raw material cost impact

• Supply disruptions emerged during the quarter but mitigating actions were done quickly –some financial impact expected in Q2 due to higher raw material and logistic costs

Operative EBIT +48% to margin of 7.7%

A P RIL 26 , 2019 Q1 2019 RE S ULT S 3

EUR million

(except ratios)

Q1

2019

Q1

2018

Δ% FY

2018

Revenue 647.8 613.7 +6 2,592.8

Operative EBITDA 95.6 69.4 +38 323.1

of which margin 14.8% 11.3% - 12.5%

Operative EBIT 50.1 33.9 +48 173.8

of which margin 7.7% 5.5% - 6.7%

Net profit 29.3 23.0 +27 95.2

EPS, EUR 0.18 0.14 +31 0.58

Pulp & Paper – continued sales price growthMarket environment

• Long-term market outlook positive with multiple investments announced recently by major pulp & paper companies like APP, Hamburger Containerboard, Mondi and Nine Dragons

Organic growth flat with positive pricing

• Exit of ECOX business impacted sales volumes

Operative EBITDA margin 13.3%

• Underlying profitability in focus

• *Due to IFRS 16, leasing costs are mostly in depreciations and partly in interest expenses in 2019, positive EBITDA impact EUR +3.3 million

A P RIL 26 , 2019 Q1 2019 RE S ULT S 4

OPERATIVE EBITDA AND OPERATIVE EBITDA-%

EUR million

REVENUE AND ORGANIC REVENUE GROWTH (Y-ON-Y)

EUR million

372 369 363373 369 376 385 390 381

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2017 2018 2019

0% +1% +2% +5% +5% +6% +7% +4% 0%

46.0 47.8 48.555.4

42.7 45.452.3 51.2 50.7

12.4% 13.0% 13.4%14.9%

11.6% 12.1%13.6% 13.1% 13.3%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1*

2017 2018 2019

Industry & Water – record-high margin

Market environment

• Water treatment market solid – expecting tighter regulation in Europe

• Oil & gas shale market growth rate moderating in the short-term

Organic growth +5%

• Our Oil & Gas business had strong organic growth, +26% to EUR 62 million

• In water treatment, we are well positioned to meet continued inflationary pressures


• Sales prices increased while propylene-based raw material prices decreased

• Favorable product mix

• *Due to IFRS 16, positive EBITDA impact EUR +4.4 million in Q1 2019

A P RIL 26 , 2019 Q1 2019 RE S ULT S 5

22.929.3

36.0

25.3 26.634.8 36.7 33.3

45.09.6%11.8%

13.9%

9.6%10.9%

12.8% 12.9% 12.3%

16.8%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1*

2017 2018 2019

OPERATIVE EBITDA AND OPERATIVE EBITDA-%

EUR million

238 248 259 264245

272 284 271 267

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2017 2018 2019

+9% +15% +20% +14%

REVENUE AND ORGANIC REVENUE GROWTH (Y-ON-Y)

EUR million

+11% +11% +2% +5%+6%

Investing in core product categories with higher return• Top 4 product categories represent 80% of

Group’s revenue, above EUR 2 billion

• Our investments have focused on:

– Bleaching chemicals

– Polymers

– Sizing* chemicals

• Current investments projects

– Netherlands – Expansion of Oil & Gas polymers

– US – Expansion of Oil & Gas polymers

– China – Completion of new Pulp & Paper AKD site

A P RIL 26 , 2019 Q1 2019 RE S ULT S 6

PRODUCTS

◼ 25% Bleaching

and pulping

◼ 20%

Polymers

◼ 20% Other:

e.g. defoamers,

dispersants,

and biocides

◼ 20%

Coagulants

◼ 15%

Sizing*

and

strength

Revenue

EUR 2,627

million

(LTM)

*Sizing = Resistance against water absorption

Key operative focus areas in 2019

1. Continue to pass on higher raw material costs to sales prices

2. Optimize capacity allocation

3. Modify product & service offering to cater better profitable growth

4. Improve operational excellence

5. Ramp-up CEOR* polymer capacity addition in Netherlands in H2

6. Start-up new sizing manufacturing site in China in H2

7. Construction of emulsion polymer capacity in the US on time and in budget, start-up expected beginning of 2021

8. Prudent cost-control in all areas

A P RIL 26 , 2019 Q1 2019 RE S ULT S 7

*CEOR, chemical enhanced oil recovery

PETRI CASTRÉN, CFO APRIL 26, 2019

A P RIL 26 , 2019 Q1 2019 RE S ULT S 8

Financials Q1 2019

Successful pricing drives improvement

A P RIL 26 , 2019 Q1 2019 RE S ULT S 9

69.4

Q12018

Sales volumes Sales prices Variable costs Fixed costs Currencyimpact

Other Q12019

Adoption ofIFRS 16standard

"Pre IFRS 16comparison"

-7.0

+34.4 -10.5 +5.4 +6.4 -2.4

OPERATIVE EBITDA BRIDGE

EUR million

614 -4%+3% 0 648

Q1 2018 Salesvolumes

Salesprices

Currencyimpact

Acquisitions Q1 2019

+6%

REVENUE AND ORGANIC GROWTH (Y-ON-Y)

EUR millionGroup’s organic growth +2%


• Strong operational improvement mainly driven by pricing

• Due to the adoption of IFRS 16 -standard, fixed costs do not include operating lease expenses in 2019, corresponding to a positive EBITDA impact of EUR 7.7 million

87.9-7.795.6

SALES PRICE VS VARIABLE COST TREND(ROLLING 12-MONTH CHANGE Y-O-Y)

-180

-120

-60

0

60

120

180

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

24

-9-18

-26 -23-16

-43

11

23

4742

3734

-18-23

-23 -13

0

1613

13

2636

38

29

11

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2016 2017 2018 2019

Net impact on EBITDA (sales prices-variable costs)

Sales prices

Variable costs

A P RIL 26 , 2019 Q1 2019 RE S ULT S 10

Net impact of sales price & variable costs positive

* 12-month rolling change vs previous year in EUR million

EUR millionEUR million

Cash flow improved in Q1

A P RIL 26 , 2019 Q1 2019 RE S ULT S 11

ALL KEY FIGURES IN EUR MILLION

271

205 210

3465

2016 2017 2018 Q1 2018 Q1 2019

118 124 106

16 14

95 66

44

7 14

2016 2017 2018 Q1 2018 Q1 2019

213

CASH FLOW FROM OPERATIONS

CAPITAL EXPENDITURE EXCL. ACQUISITIONS

◼ Growth capex190

150

• Q1 cash flow supported by improved profitability

• Seasonality led to negative change in NWC as in previous years

• Kemira’s Pension Fund Neliapila returned excess capital of EUR 15 million to Group in Q1

• IFRS 16 impact EUR +7 million on cash flow from operations

• In Q1 the largest growth capex projects were on-going completion of Pulp & Paper AKD plant in China and expansion of CEOR polymers for Oil & Gas in Netherlands

• CAPEX excl. acquisitions estimated to be around EUR 180-220 million in 2019

23 28

ROCE improving, adoption of IFRS 16 increased reported net debt

9.9% 9.7% 9.8% 9.7%10.3%

2016 2017 2018 Q1 2018LTM

Q1 2019LTM

634694 741

842

Dec 31 2016

Dec 312017

Dec 312018

Mar 312019

A P RIL 26 , 2019 Q1 2019 RE S ULT S 12

NET DEBT (EUR million) AND LEVERAGE RATIO

OPERATIVE RETURN ON CAPITAL EMPLOYED

2.32.22.1

• ROCE improvement driven by Industry & Water

• Ongoing investment projects are expected to improve Group’s ROCE once up and running

• Increase in net debt resulted from the adoption of IFRS 16 as operating leases (EUR 129 million) are part of debt

– Excluding IFRS 16 impact, net debt would have been EUR 713 million and leverage ratio 2.1

– Improved cash flow reduced underlying debt level

• Average cost of net debt excluding leases is 2.0% and duration is 28 months

2.4

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.”

A P RIL 26 , 2019 Q1 2019 RE S ULT S 13

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”.

A P RIL 26 , 2019 Q1 2019 RE S ULT S 15

Appendix

SEGMENT SPLIT PRODUCTS

A P RIL 26 , 2019 Q1 2019 RE S ULT S 16

GEOGRAPHIES

Kemira in briefLAST 12 MONTHS: REVENUE EUR 2,627 MILLION, OPERATIVE EBITDA EUR 349 MILLION, OPERATIVE EBITDA MARGIN 13.3%, OPERATIVE ROCE 10.3%

◼ 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

◼ 58%Pulp & Paper

◼ 42%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

1,170

1,417 1,457 1,477 1,520

137

171195 198 192

2014 2015 2016 2017 2018

REVENUE BYPRODUCT CATEGORY

INV E S T OR P RE S E NT A T ION 17

REVENUE BY CUSTOMERTYPE AND MARKET GROWTH

Pulp & Paper – strong business 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%

A P RIL 2019

* Solenis-BASF combined entity

Kurita (paper) #5

REVENUE AND OPERATIVE EBITDAEUR million

REVENUE BYPRODUCT CATEGORY

INV E S T OR P RE S E NT A T ION 18

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

A P RIL 2019

REVENUE AND OPERATIVE EBITDAEUR million

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

947 956906

1,0091,073

116 116107

114

131

2014 2015 2016 2017 2018

2014-2016 figures are pro forma; combination of Municipal & Industrial

and Oil & Mining segments

A P RIL 26 , 2019 Q1 2019 RE S ULT S 19

Mid- to long-term financial targets were updated due to IFRS 16 in February 2019

Targets until

end of 2018

Revenue

Operative EBITDA-% 14-16%

IFRS 16

impact

-

Gearing

Around +1%-point

Approx. +10%-pointsBelow 60%

2017

EUR 2.5 billion

2018

EUR 2.6 billion

12.5% 12.5%

59% 62%

Above-the-market

growth

Financial

targets (mid- to long-term)

Above-the-market

growth

15-17%

Below 75%

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

Q1 2019 RE S ULT S 20

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

A P RIL 26 , 2019

• IFRS 16 will affect primarily the accounting for Kemira Group’s operating leases

• Operating lease expenses are replaced by the depreciation of the right-of-use assets and interest cost associated with lease liability

• The impact on EBIT is small positive and on net profit immaterial

• No restatement of previous year figures, instead we will provide enough data for analysis

A P RIL 26 , 2019 Q1 2019 RE S ULT S 21

IFRS 16 impact on financials

EUR million

(except ratio)

FY

2018

Impact in

Q1 2019

Estimated impact

in FY 2019, around

Operative EBITDA 323.1 +7.7 +30

of which margin 12.5% +1.2 %-point +1 %-point

Impact on balance sheet

EUR million

(except ratio) Dec 31, 2018

Impact on

March 31, 2019

Net debt 741 +129

Gearing 62% +12 %-points

EUR million Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018 2018 2017

Revenue 647.8 661.8 669.6 647.6 613.7 2,592.8 2,486.0

Operative EBITDA 95.6 84.5 89.0 80.2 69.4 323.1 311.3

margin 14.8% 12.8% 13.3% 12.4% 11.3% 12.5% 12.5%

Operative EBIT 50.1 44.8 50.0 45.1 33.9 173.8 170.3

margin 7.7% 6.8% 7.5% 7.0% 5.5% 6.7% 6.9%

Net profit 29.3 26.5 22.1 23.5 23.0 95.2 85.2

Earnings per share, EUR 0.18 0.17 0.14 0.14 0.14 0.58 0.52

Cash flow from operations 65.2 88.2 64.2 23.4 34.5 210.2 205.1

Capex excl. acquisitions 28.3 53.2 34.3 39.8 23.2 150.4 190.1

Net debt 842 741 744 773 678 741 694

NWC ratio 10.6% 10.2% 9.8% 9.6% 9.5% 10.2% 9.4%

Operative ROCE (rolling 12 m) 10.3% 9.8% 9.8% 9.7% 9.7% 9.8% 9.7%

Personnel at period-end 4,973 4,915 4,798 4,858 4,740 4,915 4,732

PLEASE NOTE FINANCIAL IMPACT OF IFRS 16 ADOPTION FROM THE PREVIOUS SLIDE

Key figures

A P RIL 26 , 2019 Q1 2019 RE S ULT S 22

EUR million Q1 2019 Q1 2018 2018 2017

Net profit for the period 29 23 95 85

Total adjustments 79 42 220 204

Change in net working capital -30 -31 -51 -34

Finance expenses -7 -1 -30 -25

Income taxes paid -6 1 -24 -25

Net cash generated from operating activities 65 34 210 205

Purchases of subsidiaries and acquisit. 0 1 -43 0

Capital expenditure -28 -23 -150 -190

Proceeds from sale of assets 3 4 7 3

Change in long-term loan receivables 0 0 5 -5

Cash flow after investing activities 40 16 29 13

Cash flow

A P RIL 26 , 2019 Q1 2019 RE S ULT S 23

Currencies

Currency exchange rates had around EUR +18 million impact on revenue andEUR +6 million impact on the operative EBITDA in Q1 2019 compared to Q1 2018.

Guidance: 10% change in our main foreign currencies would approximately haveEUR 15 million impact on operative EBITDA on an annualized basis.

A P RIL 26 , 2019 Q1 2019 RE S ULT S 24

◼ 43% EUR

◼ 7% Others

KEMIRA REVENUE DISTRIBUTION Q1 2019 KEMIRA COST DISTRIBUTION Q1 2019

◼ 2% SEK

◼ 3% CNY

◼ 4% CAD

◼ 37% USD

◼ 7% Others

◼ 5% CNY

◼ 4% CAD

◼ 6% SEK

◼ 29% USD

◼ 44% EUR◼ 2% BRL

◼ 2% GBP

◼ 3% GBP

◼ 2% PLN

KEY FINANCIALS

Pulp & Paper

A P RIL 26 , 2019 Q1 2019 RE S ULT S 25

*12-month rolling average


Revenue 380.8 390.4 385.2 376.0 368.7 1,520.2 1,476.9


margin 13.3% 13.1% 13.6% 12.1 11.6% 12.6% 13.4%

Operative EBIT 20.6 24.1 26.6 22.0 18.9 91.6 104.8

margin 5.4% 6.2% 6.9% 5.9% 5.1% 6.0% 7.1%

Operative ROCE*, % 7.7% 7.8% 8.5% 8.3% 8.6% 7.8% 9.0%

Capital expenditure (excl. M&A) 17.3 28.8 20.7 21.4 14.2 85.1 138.3

Cash flow after investing

activities

25.1 -13.5 20.6 2.3 20.5 29.9 15.7

KEY FINANCIALS

Industry & Water

A P RIL 26 , 2019 Q1 2019 RE S ULT S 26

*12-month rolling average


Revenue 267.0 271.5 284.4 271.7 245.0 1,072.6 1,009.1


margin 16.8% 12.3% 12.9% 12.8% 10.9% 12.3% 11.3%

Operative EBIT 29.5 20.8 23.4 23.0 15.0 82.2 65.5

margin 11.0% 7.7% 8.2% 8.5% 6.1% 7.7% 6.5%

Operative ROCE*, % 15.4% 13.6% 12.5% 12.6% 11.8% 13.6% 11.0%

Capital expenditure (excl. M&A) 11.0 24.4 13.6 18.4 9.0 65.3 51.7

Cash flow after investing

activities

27.8 23.8 26.8 6.1 -4.0 52.5 46.9

FY 2018

Revenue split by country

A P RIL 26 , 2019 Q1 2019 RE S ULT S 27

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%

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.

A P RIL 26 , 2019 Q1 2019 RE S ULT S 28

* Revenue growth in local currencies, excluding acquisitions and divestments

strong earnings improvement in q1...operative ebitda margin 14.8% • strong operational improvement...

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