strong earnings improvement in q1...supplier sustainability evaluation • 90% of direct key...
TRANSCRIPT
INVESTOR PRESENTATION
Strong earnings improvement in Q1
APRIL 26, 2019
SEGMENT SPLIT PRODUCTS
A P RIL 2019 INV E S T OR P RE S E NT A T ION 2
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
Global megatrends favor Kemira
A P RIL 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
A P RIL 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
• Debottlenecking done in Finland during 2018
• In Q3 2018, decided to close non-core detergent business to direct bleaching chemical capacity to pulp customers
Regulation trends favorable to demand of water treatment chemicals
A P RIL 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
2 137
2 373 2 363
2 486
2 593
2014 2015 2016 2017 2018
OPERATIVE EBITDAOPERATIVE EBITDA MARGINEUR million
253
287
303311
323
11.8%12.1%
12.8%12.5% 12,5%
2014 2015 2016 2017 2018
INV E S T OR P RE S E NT A T ION 6
Delivering profitable growth
A P RIL 2019
PRE IFRS 16
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 7
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 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
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
Kemira’s mid- to long-term financial targets
A P RIL 2019 9
Targets 2017 2018 IFRS 16 impact Q1 2019 Mid- to long-term
target
Revenue EUR 2,486 million
Change +5%
EUR 2,593 million
Change +4%
- EUR 648 million
Change +6%
Above-the-market
growth
Operative
EBITDA*
12.5% 12.5% Around +1 %-point 14.8% 15-17%
Gearing* 59% 62% Around +10 %-points 74% Below 75%
Factors Q1 2019 comments
Organic growth through volume and sales price increases Group’s organic growth +2%
Oil & Gas becoming larger share of Group (incl. shale, CEOR and oil sands) Revenue from EUR 126m in 2016 to EUR 258m in Q1/19
Sales price vs raw material price development Raw material inflation in 2017 and 2018, sales prices
started to offset raw material cost pressure during 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
A P RIL 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
Kemira pays stable and competitive dividend• Kemira’s dividend policy is to pay a stable
and competitive dividend
• Kemira has paid dividend every year since listing of shares in 1994
• 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
A P RIL 2019
Kemira’s dividend yield calculated using the share price at year-end
Our three sustainability priorities
A P RIL 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
A P RIL 2019 INV E S T OR P RE S E NT A T ION 13
Latest news andfinancials
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 2019 INV E S T OR P RE S E NT A T ION 14
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
• Operating leases are depreciated in 2019 due to IFRS 16 – impact on EBITDA EUR +7.7 million in Q1
Operative EBIT +48% to margin of 7.7%
A P RIL 2019 INV E S T OR P RE S E NT A T ION 15
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 Containerbord, 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 2019 INV E S T OR P RE S E NT A T ION 16
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
Operative EBITDA margin 16.8%
• 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 2019 INV E S T OR P RE S E NT A T ION 17
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 2019 INV E S T OR P RE S E NT A T ION 18
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 2019 INV E S T OR P RE S E NT A T ION 19
*CEOR, chemical enhanced oil recovery
Successful pricing drives improvement
A P RIL 2019 INV E S T OR P RE S E NT A T ION 20
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%
Operative EBITDA margin 14.8%
• 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 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
Cash flow improved in Q1
A P RIL 2019 INV E S T OR P RE S E NT A T ION 22
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 2019 INV E S T OR P RE S E NT A T ION 23
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 2019 INV E S T OR P RE S E NT A T ION 24
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
• 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 2019 INV E S T OR P RE S E NT A T ION 25
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
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 26
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 2019
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
A P RIL 2019 INV E S T OR P RE S E NT A T ION 27
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 2019 INV E S T OR P RE S E NT A T ION 28
◼ 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
• 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
A P RIL 2019 INV E S T OR P RE S E NT A T ION 29
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
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
A P RIL 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 31A P RIL 2019
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 23.0 28.8 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
2018 AND PRIOR FIGURES ARE PRE IFRS 16
Key figures
A P RIL 2019 INV E S T OR P RE S E NT A T ION 32
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 2019 INV E S T OR P RE S E NT A T ION 33
KEY FINANCIALS
Pulp & Paper
A P RIL 2019 INV E S T OR P RE S E NT A T ION 34
*12-month rolling average
EUR million Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018 2018 2017
Revenue 380.8 390.4 385.2 376.0 368.7 1,520.2 1,476.9
Operative EBITDA 50.7 51.2 52.3 45.4 42.7 191.7 197.7
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 2019 INV E S T OR P RE S E NT A T ION 35
*12-month rolling average
EUR million Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018 2018 2017
Revenue 267.0 271.5 284.4 271.7 245.0 1,072.6 1,009.1
Operative EBITDA 45.0 33.3 36.7 34.8 26.6 131.5 113.6
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 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
A P RIL 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
A P RIL 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
A P RIL 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
A P RIL 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
A P RIL 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
A P RIL 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
A P RIL 2019 INV E S T OR P RE S E NT A T ION 43
END-PRODUCTSWHERE AKD WAXIS USED
Pulp & Paper
A P RIL 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
A P RIL 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
A P RIL 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
A P RIL 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 Eastern Europe due to
roll-out of Kemira ERP system.
Kemira’ssix actions for cleaner waters
1. The requirements of the Urban Wastewater Treatment Directive (UWWTD) must be implemented fully and equally in all member states.
2. Emission limit values (especially phosphorus) in water discharges should be tightened.
3. Digitalization can improve both the quality of monitoring and the cost efficiency of water treatment.
4. Emerging pollutants need to be included in the legislation.
5. Pollution from storm-water overflows must be limited and discharges safely disinfected.
6. Clearer guidance is needed on applying innovation and sustainability criteria in public procurement for water treatment.
A P RIL 11 , 2019 K E MIRA FOR W A T E R T RE A T ME NT 48
Implementation of wastewater treatment directive varies in EU• There are significant
implementation gaps of the Urban Wastewater Treatment Directive, even though the first collection and treatment requirements of the Directive already entered into force in 2001
A P RIL 11 , 2019 K E MIRA FOR W A T E R T RE A T ME NT 49
0
10
20
30
40
50
60
70
80
90
100
Austr
ia
Belg
ium
Bulg
aria
Cro
atia
Cypru
s
Cze
ch R
ep
ub
lic
Denm
ark
Esto
nia
Fin
land
Fra
nce
Germ
any
Gre
ece
Hung
ary
Ire
land
Italy
Latv
ia
Lithu
ania
Luxe
mb
ou
rg
Ma
lta
Neth
erla
nds
Pola
nd
Port
ug
al
Rom
ania
Slo
vakia
Slo
ven
ia
Spa
in
Sw
ede
n
United
Kin
gd
om
2010 2012 2014
Degree of compliance in water discharges*
% of subjected load
* Degree of compliance with Article 5 of the Directive, which sets the requirements for water discharges to sensitive areas.
Source: European Commission, 9th report on the implementation status concerning urban waste water treatment.
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
A P RIL 2019 INV E S T OR P RE S E NT A T ION 50
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%
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
A P RIL 2019 INV E S T OR P RE S E NT A T ION 51
Industry & Water
A P RIL 2019 INV E S T OR P RE S E NT A T ION 52
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
A P RIL 2019 INV E S T OR P RE S E NT A T ION 53
SHAREHOLDERS ON MARCH 31, 2019
% OF SHARES
1. Oras Invest 18.2%
2. Solidium (owned by State of Finland) 14.9%
3. Varma Mutual Pension Insurance Company 3.4%
4. Ilmarinen Mutual Pension Insurance Comp. 2.5%
5. Kemira Oyj 1.7%
Total number of shares 155,342,557
Foreign ownership of shares 28.4%
Total number of shareholders 34,048
KEMIRA BOARD OF DIRECTORS
A P RIL 2019 INV E S T OR P RE S E NT A T ION 54
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
A P RIL 2019 INV E S T OR P RE S E NT A T ION 55
Jukka Hakkila, Chief Legal Officer, (with Kemira since 2005) acts as secretary of Management Board and Board of Directors.
JARI ROSENDAL
President and CEO
With Kemira since 2014
KIM POULSEN
President
Pulp & Paper
With Kemira since 2015
ANTTI SALMINEN
President
Industry & Water
With Kemira since 2011
PETRI CASTRÉN
CFO
With Kemira since 2013
MATTHEW PIXTON
CTO
With Kemira since 2016
ESA-MATTI PUPUTTI
EVP, Operational
Excellence
With Kemira since 2015
EEVA SALONEN
EVP, Human Resources
With Kemira since 2008
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.
4 R&D projects were started in Q1 and 3 of them are
designed to improve customer resource efficiency. One
project to improve resource efficiency was commercialized
during Q1. Other projects improve customer product quality.
Responsible
operations and supply
chain
Workplace safety
Achieve zero injuries on long term;
TRIF* 2.0 by end of 2020.
Q1 2019 was the best TRIF result for many years. The
preventive work with Behaviour Based Safety and using
leading indicators like hazardous conditions and activities
on a daily basis are beginning to show results via lower
number of people incidents as well as severity.
Climate change
Kemira Carbon Index ≤ 80 by end of
2020 (2012 = 100). This KPI is reported
once a year.
Efforts to decrease carbon footprint continue mainly by
sourcing a higher share of electricity from low carbon
sources and through energy efficiency 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 continues with an
additional 6 new suppliers screened during Q1. Another 14
have been invited to take an assessment and one audit is
in progress.
Corporate responsibility performance Q1 2019
A P RIL 2019 INV E S T OR P RE S E NT A T ION 56
49%
51%
Baseline average2016-2017
2018
10088 91 93
86 85 83 80
12 13 14 15 16 17 18 Target20
69% 71%
90%
11 11
25
0
10
20
30
40
50
0%
20%
40%
60%
80%
100%
Baseline 2018 Q1 2019 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
7,2
3,43,9 3,5
2,3 2,0
15 16 17 18 Q1'19 Target2020
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. 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.
15 leadership activities in Q1. Leadership activities overall
1548 vs target 1500 by year 2020.
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.
Mandatory training on the Kemira Code of Conduct and
general awareness-building on GDPR was continued for
Kemira employees.
Corporate responsibility performance Q1 2019
A P RIL 2019 INV E S T OR P RE S E NT A T ION 57
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
A P RIL 2019 INV E S T OR P RE S E NT A T ION 58