Good revenue growth in 2017 - Kemira · 2018-02-08 · increase, growth in coagulants +4% • Operative EBITDA margin declined due to higher raw material prices as well as margin-diluting

JANUARY-DECEMBER 2017

Good revenue growth in 2017

JARI ROSENDAL, PRESIDENT AND CEO PETRI CASTRÉN, CFOFEBRUARY 8, 2018

2017 was tail-weighted as expected

Selected highlights in 2017

• Re-organization completed without disruptions to business

• Strong recovery in Oil & Gas

• Healthy volume growth in Pulp & Paper and water treatment

• Sales prices started to offset increasing raw material costs in H2

• Major projects executed

– Acquisition synergy program completed

– Sourcing of logistics with Odyssey commenced

– Start-up of new chlorate capacity in Finland

• CEOR investment for higher demand

Challenges faced in 2017

• Raw material availability and price increasesin certain areas

• Disruptions due to hurricanes Harvey and Irma as well as force majeure by Venator

• EUR/USD swiftly from 1.05 to 1.20

FE B RUA RY 8 , 2018 FY 2017 RE S ULT S 2

TARGETS:

Above-the-market

growth and operative

EBITDA of 14-16%

ACQUISITIONS ORGANIC GROWTH

OPERATING

COST DISCIPLINE EFFICIENCY

Key financial highlights

FY 2017

• Organic growth +6% driven by volumes

• Operative EBITDA increased according to outlook

– H1 EUR 6 million below prior year, margin 11.9%

– H2 EUR 14 million above prior year, margin 13.1%

• EPS impacted negatively by EUR 12.7 million settlement and prior year EPS includes gainon sale of electricity assets

• Board of Directors proposes a dividend ofEUR 0.53 per share

EUR million

(except ratios)

FY

2017

FY

2016

Δ%

Revenue 2,486 2,363 +5

Operative EBITDA 311.3 302.5 +3

of which margin, % 12.5 12.8 -

Operative EBIT 170.3 170.1 0

of which margin, % 6.9 7.2 -

Net profit 85.2 97.9 -13

EPS, EUR 0.52 0.60 -13

Dividend per share,

proposal by the BoD, EUR 0.53 0.53 0


REVENUE EUR million

2 229

2 137

2 373 2 363

2 486

2013 2014 2015 2016 2017

OPERATIVE EBITDAOPERATIVE EBITDA MARGINEUR million

252 253

287

303311

11.3%

11.8%12.1%

12.8%

12.5%

2013 2014 2015 2016 2017

FY 2017 RE S ULT S 4

Delivering profitable growth

FE B RUA RY 8 , 2018

Pulp & Paper – good volume growth continuedFY 2017

• Organic growth +2%, driven by volumes

– Volumes grew especially in pulp andstrength chemicals

– Sales price decline stopped in H2

• Operative EBITDA margin 13.4%

– Synergies and organizational efficiencies supported positively

– Raw material price inflation impacted negatively

• Integration of AkzoNobel’s paper chemicals business completed, synergy realization above initial plan


1,457 1,477

2016 2017

195 198

2016 2017

REVENUE ANDREVENUE GROWTHEUR million

OPERATIVE EBITDA AND OPERATIVE EBITDA MARGINEUR million

+1 %+1 %

13.4% 13.4%

Pulp & Paper – driving growth as market leader

• Good growth in revenue and operativeEBITDA in 2013-2017

• We aim to grow faster than the market

• Volume growth expected to be driven by

– High demand for pulp

– Increasing e-commerce and transportation

– Recycling of board and paper

• AKD acquisition / joint venture in China is excellent fit to our portfolio

– Kemira strengthens its position and secures supply of key raw material for AKD wax

– AKD is sizing chemical used in board and paper to create resistance against liquid absorption

– Good contribution to P&L in 2019 after ramp-up


REVENUE AND OPERATIVE EBITDAEUR million

1,0681,170

1,417 1,457 1,477

130 137

171195 198

2013 2014 2015 2016 2017

40%

Pulp

20%

Printing &

writing papers 40%

Board & tissue

-1-2%2-3%1-2%Market

growth

REVENUE BY CUSTOMER TYPE

Industry & Water – growth driven by Oil & Gas recoveryFY 2017

• Strong revenue growth as North American oil & gas market recovered

– Oil & Gas revenue +56% to EUR 197 million

– Especially good demand for polymers used in shale oil & gas industry

– Demand for water treatment continued to increase, growth in coagulants +4%

• Operative EBITDA margin declined due to higher raw material prices as well as margin-diluting new businesses related to equipment sale and CEOR field trial


906

1009

2016 2017

107114

2016 2017

REVENUE ANDREVENUE GROWTHEUR million

OPERATIVE EBITDA AND OPERATIVE EBITDA MARGINEUR million

+11 % +6%

11.8%11.3%

Industry & Water – solid growth market with broad customer base

• Water treatment is solid business with 9,000 ship-to customers with estimated 2-3% market growth

• Oil & Gas, now 20% of the segment, is focused on three applications with estimated annual market growth of 5-6%

– Friction reduction in North American shale oil & gas fields

– Water treatment in Canadian oil sands

– Chemical Enhanced Oil Recovery

• New CEOR polymer capacity investment in Netherlands supports our growth ambitions


971 947 956906

1009

101116 116 107 114

2013 2014 2015 2016 2017

REVENUE AND OPERATIVE EBITDAEUR million

70%

Water treatment

10%

Other 20%

Oil & Gas

2-3%5-6%2-3%Market

growth

REVENUE BY APPLICATION

2013-2016 figures are pro forma; combination of Municipal & Industrial and

Oil & Mining segments

Major actions to support profitability in 2018-2019

• Full contribution of new chlorate capacity in Finland

• Efficiencies from two segment structure

• BOOST program, e.g. transportation costs

• Acquisition / joint venture in China: closing expected in H1 and ramp-up in H2/18

• Focus to improve or reduce currently margin-dilutive businesses

Uncertainties

• Raw material availability and prices

• Regulatory changes, e.g. China

• Currencies

OPERATIVE EBITDAEUR million

287

303311

2015 2016 2017


Drivers for profitability improvement

Outlook for 2018

Kemira expects its operative EBITDA to increase from the prior year(2017: EUR 311.3 million).


EUR

million

2013 2014 2015 2016 2017 2018

outlook

Operative

EBITDA

252 253 287 303 311 ”Increase”

Progressing our strategy forprofitable growth


GROUP’S MID- TO LONG-TERM TARGETS

Above-the-market growth

Operative EBITDA 14-16%

Gearing below 60%

Dividend policy: stable and competitive dividend

Balanced cash flow

and capex

Increase

efficiency

Grow by investing,

innovating and capturing

market opportunities

PETRI CASTRÉN, CFO FEBRUARY 8, 2018


Financials Q4 2017

Group’s organic revenue growth continued

• Group’s organic growth +11%

– Pulp & Paper +5%

– Industry & Water +20%

596+9% -4% 0% 637

Q4 2016 Salesvolumes

Salesprices

Currencyimpact

Acquisitions Q4 2017

+2% 72.878.9 80.8

70.0 69.077.1

84.5 80.7

12.5% 13.4% 13.6%11.7% 11.3%

12.5%13.6% 12.7%

0

20

40

60

80

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2016 2017


Q4 2017

• Operative EBITDA margin 12.7%,+100 bps compared to prior year

– Sales prices and volumes main drivers, variable costs and FX were headwinds

Revenue and organic revenue growth (y-on-y)EUR million

Operative EBITDA and operative EBITDA margin EUR million

Pulp & Paper – strong results in Q4

• Volume growth +4%, helped by recent chlorate capacity start-up in Finland and shutdown at major customer mill in comparison period

• Record-high profitability driven by volumes, lower fixed costs, higher utilization rates, and other positive items during the quarter



Operative EBITDA and operative EBITDA marginEUR million

362 361 365 369 372 369 363 373

0

100

200

300

400

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2016 2017

47.9 49.3 51.846.3 46.0 47.8 48.5

55.4

13.2% 13.7% 14.2%12.6% 12.4% 13.0% 13.4%

14.9%

0

20

40

60

80

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2016 2017

+3% +1% -4% -2% 0% +1% +2% +5%

Industry & Water – good growth continued

• Growth rate exceptionally high, Oil & Gas +54% being the main factor in Q4 2017

– Also water treatment continued on good growth path, high-single digit growth in coagulants

• Profitability impacted due to higher raw material prices and margin-dilutive equipment sale as well as lower capacity utilization rates at certain manufacturing sites

• Q4 profitability is typically weaker due to seasonality

220 227 231 228 238 248 259 264

0

100

200

300

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2016 2017

24.929.6 29.0

23.7 22.929.3

36.025.3

11.3%13.1% 12.5%

10.4% 9.6%11.8%

13.9%

9.6%

0

20

40

60

80

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2016 2017



Operative EBITDA and operative EBITDA margin EUR million

-7% -5% 0% +9% +15%-5% +6% +20%

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

Brent oil, USD Sales prices* Variable costs*

SALES PRICES AND VARIABLE COSTS ONEBITDA LEVEL (CHANGE Y-O-Y)

9

5

-3-10

-16 -20

-10

-2-9

-18

-26-23

-16

-4

3

11

-18

-23

-23-13

0

1613

13

-30

-20

-10

0

10

20

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2016 2017

Net impact on EBITDA (sales prices-variable costs)

Sales prices

Variable costs


Gap between variable costs and sales prices narrowing

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

54% 54%

59%

2015 2016 2017

Development of selected key figures

• Net debt EUR 694 million with average cost of debt 2.0% (2016: 2.1%)

• NWC ratio improved to 9.4% (10.2%)

• Reported tax rate in 2017 24.3% (23.5%)

– Going forward the US tax reform will lower income taxes for Kemira in the country, although short-term negative impact from new BEAT* provisions


2.2

NET DEBT / OPERATIVE EBITDA AND GEARING

2.1

Net debt

634m

Net debt

694mNet debt

642m

2.2

* BEAT = Base Erosion Anti-Abuse Tax

• New chlorate plant in Brazil and new chlorate line in Finland

• Capacity additions due to integration of acq.

• Polymer capacity in Italy and UK

50 60 59

53 58 65

78

95 66

2015 2016 2017

CAPEX guidance 160-200 MEUR in 2018

Expansion Improvement Maintenance

190

CAPITAL EXPENDITURE EXCLUDING

ACQUISITIONSEUR million and share of revenue

213

RECENT LARGEST VALUE CREATING

INVESTMENTS

CAPEX GUIDANCE

• In 2018, capital expenditure estimated to beEUR 160-200 million

– Includes capacity expansion in Oil & Gas


182

7.7%

9.0%7.6%

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

5.8% 4.5% 4.4% 5.4% 4.9% 4.4% 4.6%

2011 2012 2013 2014 2015 2016 2017

FY 2017 RE S ULT S 19

Dividend per share Dividend yield

FE B RUA RY 8 , 2018

*

Kemira’s dividend yield calculated using the share price at year-end

*BoD proposal to the AGM 2018

JANUARY-DECEMBER 2017


Appendix

Revenue and operative EBITDA split


REVENUE SPLIT

EUR 637 million EUR 2,486 million

OPERATIVE EBITDA

EUR 81 million EUR 311 million

Q4 2017 2017 Q4 2017 2017

Pulp & Paper

Industry & Water

59%

41% 40%

60%

31%

69% 64%

36%

Pulp & Paper


FY2017: REVENUE EUR 1,477 MILLION, OPERATIVE EBITDA EUR 198 MILLION, MARGIN 13.4%

CUSTOMERS, examples

GEOGRAPHIES

CUSTOMER

MILLS

40%

Board & tissue

production

40%

Pulp production

20%

Paper production

PRODUCTS

35%

Bleaching

and pulping

25%

Sizing &

strength

20%

Defoamers,

dispersants,

biocides and other

process chemicals

10% Polymers

10% Other

35%

Americas

50%

EMEA

15%

APAC

Note: Revenue by industry, product and geography rounded to the nearest 5%

Industry & Water


FY2017: REVENUE EUR 1,009 MILLION, OPERATIVE EBITDA EUR 114 MILLION, MARGIN 11.3%

MUNICIPAL (40%), Customer examples

GEOGRAPHIES

APPLICATION

SPLIT

70%

Water treatment

20%

Oil & Gas

10%

Other applications

PRODUCTS

40%

Coagulants

20%

Other products

such as defoamers

and biocides

40%

Polymers

INDUSTRIAL (60%), Customer examples

London New York City

Shanghai

Los Angeles

Montreal

Toronto

MiamiMelbourne

Amsterdam

Barcelona

Washington DC

Berlin

Paris

Stockholm

OsloLas Vegas

45%

Americas

50%

EMEA

5%

APAC

Note: Revenue by industry, product and geography rounded to the nearest 5%

EUR million Q4 2017 Q4 2016 Δ% 2017 2016 Δ%

Revenue 636.5 596.5 +7 2,486.0 2,363.3 +5

Operative EBITDA 80.7 70.0 +15 311.3 302.5 +3

margin 12.7% 11.7% - 12.5% 12.8% -

Operative EBIT 44.0 36.1 +22 170.3 170.1 0

margin 6.9% 6.1% - 6.9% 7.2% -

Net profit 25.8 18.2 +42 85.2 97.9 -13

Earnings per share, EUR 0.16 0.11 +45 0.52 0.60 -13

Cash flow from operations 71.4 102.4 -30 205.1 270.6 -24

Capex excl. acquisitions 64.2 89.4 -28 190.1 212.6 -11

Net debt 694 634 +10 694 634 +10

NWC ratio 9.4% 10.2% - 9.4% 10.2% -

Operative ROCE (rolling 12 months) 9.7% 9.9% - 9.7% 9.9% -

Personnel at period-end 4,732 4,818 -2 4,732 4,818 -2

Key figures


EUR million Q4 2017 Q4 2016 2017 2016

Net profit for the period 26 18 85 98

Total adjustments 37 50 204 187

Change in net working capital 18 48 -34 29

Finance expenses -6 -12 -25 -20

Income taxes paid -4 -2 -25 -23

Net cash gen. from operating activities 71 102 205 271

Purchases of subsidiaries and acquisit. 0 0 0 2

Capital expenditure -64 -89 -190 -213

Proceeds from sale of assets 2 0 3 37

Change in long-term loan receivables -5 0 -5 1

Cash flow after investing activities 4 13 13 98

Cash flow


EUR million Q4 2017 Q4 2016 Δ% 2017 2016 Δ%

Revenue 372.8 368.6 +1 1,476.9 1,457.3 +1


margin 14.9% 12.6% - 13.4% 13.4% -

Operative EBIT 30.9 24.5 +26 104.8 111.6 -6

margin 8.3% 6.7% - 7.1% 7.7% -

Operative ROCE*, % 9.0% 10.0% - 9.0% 10.0% -

Capital expenditure 41.1 56.4 -27 138.3 125.1 +11

Cash flow after investing activities 4.4 19.8 -78 15.7 105.7 -85

KEY FINANCIALS

Pulp & Paper


*12-month rolling average

EUR million Q4 2017 Q4 2016 Δ% 2017 2016 Δ%

Revenue 263.8 227.9 +16 1,009.1 906.0 +11


margin 9.6% 10.4% - 11.3% 11.8% -

Operative EBIT 13.1 11.6 +14 65.5 58.5 +12

margin 5.0% 5.1% - 6.5% 6.5% -

Operative ROCE*, % 11.0% 9.7% - 11.0% 9.7% -

Capital expenditure 23.1 32.9 -30 51.7 85.5 -39

Cash flow after investing activities 8.3 6.8 +23 46.9 35.6 +32

KEY FINANCIALS

Industry & Water


*12-month rolling average

Revenue and cost distribution per currency

Currency exchange rates had around EUR +2 million impact on the operative EBITDAin 2017

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


42% EUR 13% Others

KEMIRA REVENUE DISTRIBUTION 2017 KEMIRA COST DISTRIBUTION 2017

3% CNY

2% BRL

5% CAD

35% USD

10% Others

4% CNY

6% CAD

8% SEK

30% USD

42% EUR

FY 2017

Revenue split by country


USA 27%

Canada 6%

Brazil 3%

Uruguay 2%

Other Americas 1%

Finland 14%Sweden 6%

Germany 5%

Poland 3%

UK 3%

Spain 2%

Other APAC 4%

Korea 1%

China 4%

Russia 2%

Netherlands 2%

France 2%

Italy 2%

Other EMEA 9%

Norway 2%

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


Documents

Good revenue growth in 2017 - Kemira · 2018-02-08 · increase, growth in coagulants +4% • Operative EBITDA margin declined due to higher raw material prices as well as margin-diluting