Kemira's January-June 2013 Interim Report result presentation

January-June 2013

Kemira Interim report

Wolfgang Büchele, President and CEO | July 23, 2013

Agenda Kemira Interim report January-June 2013

Where water meets chemistryTM

Q2 2013

Outlook

Appendix

Focus on paper, oil & gas, mining and water treatment

Kemira in the value

chain of WQQM*

Expertise and tailored

combinations of

chemicals

for water-intensive

industries

Improving our

customers’ water,

energy and raw

material efficiency

*) Water Quality and Quantity Management

23 July 2013 Kemira Interim report Q2 2013, Wolfgang Büchele 3

Strengthening market position in polymer product line

Kemira to acquire 3F Chimica

for EUR 85 million

3F revenue is approximately

EUR 75 million, mainly polymer product

line related

Acquisition increases polymer capacity

(2 sites in Europe and 1 in the US)

Closes technology gaps in monomer

and polymer production

Transaction is expected to result

in substantial synergies


Kemira Interim report Q2 2013, Wolfgang Büchele

Accelerating shift to fast growing differentiated products 3F acquisition and the divestment of ChemSolutions formic acid and derivatives product lines would

increase the share of Kemira differentiated product line revenue from 40% to 45%

Differentiated product lines Commodity product lines

%-of total

revenue in

2012

Polymers Sizing and

strength

Defoamers,

dispersants,

biocides and

other process

chemicals

Coagulants Bleaching

chemicals

Formic acid

and derivatives

Miscellaneous

commodity

products*

Paper 10% 20% 20% 5% 25% - 20%

M&I 20% - 5% 65% - - 10%

O&M 50% - 20% 5% - - 25%

Chem-

Solutions

- - - - - 80% 20%

Kemira 20% 10% 10% 25% 10% 10% 15%


*) Mainly sodium percarbonate, colorants, acrylamide, inorganic salts and acids as well as caustic soda

• Revenue EUR 569 million (562 in Q2 2012), +1%

– Organic revenue growth +4%, driven by increased sales volumes

• Operative EBIT EUR 40 million (36), +11%

– Operative EBIT margin 7.0% (6.4%)

– ”Fit for Growth” savings EUR 10 million

• Non-recurring items impacting EBIT amounted to EUR 27 million

– Thereof Vaasa site closure (15), Business Service Center (6) and

”Fit for Growth” related restructuring charges (3)

• Net working capital (ratio) of revenue reduced to 11.3%

(12.8% in 2012)

– Lower inventories and higher payables

• Cash flow after investing activities increased vs Q2 2012*

Continued organic revenue growth and improved profitability April-June 2013

6

*) Excluding EUR 5.3 million dividends and EUR 27.3 million paid-in-capital from JV Sachtleben in Q2 2012

23 July 2013 Kemira Interim report Q2 2013, Wolfgang Büchele

Accelerating organic growth driven by increased sales volumes Kemira Group revenue growth trend

-15%

-10%

-5%

0%

5%

10%

15%

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

2009 2010 2011 2012 2013

Organic growth Currency Acquisitions Divestments Total growth


Sales volumes increased in all segments

Kemira Group operative EBIT bridge, EUR million

Q2 2012 Sales volumes Sales prices Variable costs Fixed costs Currency impact Others, incl.acquisitions and

divestments

Q2 2013

36.0 10.8 40.0 -0.6 -0.7 -4.9 0.4 -1.0

Including one off

consultancy and

advisory expenses

of EUR 3 million


Restructuring charges related to ”Fit for Growth” booked, all measures under implementation

• ”Fit for Growth” cost savings impact was EUR 10 million in Q2 2013

(full run rate EUR 15 million per quarter)

• Full run rate expected to be achieved in Q4 2013

EUR 60 million

cost savings in 2014

1. Redundancies and leaner organization:

EUR 30 million (Headcount reduced by 517)

2. Manufacturing network consolidation:

EUR 21 million (12 site and 2 production plant

closures decided)

3. Leaner operation:

EUR 9 million (# SKU’s reduced by 45%)

Restructuring charges amounted to

EUR 76 million (85)

Reported between Q3 2012 – Q2 2013:

• EUR 46 million cash cost,

mainly for severance payments

• EUR 30 million, asset write-downs


Operative EBIT increased more year-on-year in Q2 compared to Q1 • Full run rate of

”Fit for Growth” savings

expected in Q4 2013

• Vaasa process chemical

site closure to bring

EUR 5 million and

Business Service Center

EUR 10 million additional

annualized cost savings

• 3F acquisition expected

to result in substantial

synergies in raw material,

logistics and other fixed

costs in 2014

39 36

44

27

33 30

3

7

9 10

545

550

555

560

565

570

575

0

5

10

15

20

25

30

35

40

45

50

Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

Underlying operative EBIT "Fit for Growth" savings Revenue

EUR million


Paper organic growth was 7% in Q2 2013

• Strong sales volume

growth in Sizing, Polymers,

and other differentiated

process chemicals

• Pulp chemical sales

volumes grew, especially

in EMEA and SA

• Hydrogen peroxide

capacity increased by 65%

in Fray Bentos, Uruguay

to serve growing pulp

production in the region

*) Divestments (FWA and Maitland hydrogen peroxide), exited businesses (Siilinjärvi calcium sulphate) and transferred businesses (Sodium percarbonate) are excluded

0

200

400

600

800

1,000

1,200

2009 2010 2011 2012 1-6 2012 1-6 2013

Commodity products Differentiated products

CAGR: +12%

CAGR: +5%

Paper segment revenue*, EUR million

760

873 907

965

524 497 +6%

Share of revenues

Packaging & Board 26%

Tissue & Specialties 6%

Printing & Writing 22%

Pulp 47%


Profitable growth accelerated in Paper April-June 2013

Revenue increased by 6% to

EUR 265 million (249) • EMEA revenue increased more than 10% driven by

sales volume growth in all main product lines

• Sales prices decreased slightly

• Currency exchange -1%

EUR million Q2/2013 Q2/2012 % 1-6/2013 1-6/2012 % 2012

Revenue 265 249 6 524 497 5 1,006

Operative EBIT 19.5 16.1 21 39.2 34.9 12 75.3

Operative EBIT, % 7.4 6.5 - 7.5 7.0 - 7.5

Cash flow 18 10 80 48 9 433 8

Operative EBIT increased 21% to

EUR 19.5 million (16.1) • Organic revenue growth

• Higher sales and marketing expenses compensated by

”Fit for Growth” savings

• Operative EBIT margin increased to 7.4% (6.5%)

Strong cash flow


9.2%

7.1%

5.7%

7.1%

0

150

300

450

600

750

2010 2011 2012 YTD 2013

Municipal & Industrial profitability has started to turn around

• Sales volumes growth in

all the main product lines

• Increased coagulant sales

prices in SA

• ”Fit for Growth” savings

were EUR 5 million in Q2

2013

Coagulants Operative EBIT %

Antiscalants, biocides, defoamers, miscellaneous commodity chemicals

Polymers

644 665 687

343

M&I revenue and operative EBIT-% EUR million


Profitable growth in Municipal & Industrial April-June 2013

Revenue increased 2% to

EUR 178 million (174) • Revenues increased in all regions, except APAC

• Currency exchange -1%

EUR million Q2/2013 Q2/2012 % 1-6/2013 1-6/2012 % 2012

Revenue 178 174 2 343 335 2 687

Operative EBIT 15.9 12.0 33 24.5 17.7 38 39.2

Operative EBIT, % 8.9 6.9 - 7.1 5.3 - 5.7

Cash flow 5 -3 - 5 4 25 39


EUR 15.9 million (12.0) • Increased sales prices and sales volumes, as well as

lower fixed costs

• Higher variable costs due to increased propylene

based raw material prices during Q1 2013

• Operative EBIT margin increased to 8.9% (6.9%)


Differentiated product line sales volumes continued to recover in Oil & Mining

• Polymer sales volumes

in NAFTA increased more

than 20% year-on-year in

Q2 2013

• Oil & Mining differentiated

product lines revenue grew

7% in Q2 2013 compared

to Q1 2013 211

235 247

61

65

0

50

100

150

200

250

2010 2011 2012 YTD 2013

Differentiated product lines revenue, EUR million

CAGR: 9% Q2

Q1


+7%

Oil & Mining sales volumes increased April-June 2013

Revenue decreased 5% to

EUR 79.9 million (84.5) • -4% impact related to exiting from low margin products

as communicated earlier (full impact of EUR 10 million

will be realized by the end of 2013, YTD 2013 impact

EUR 7 million)

• Sales volumes increased for the first time in

six quarters

• Sales prices declined

EUR million Q2/2013 Q2/2012 % 1-6/2013 1-6/2012 % 2012

Revenue 79.9 84.5 -5 156 170 -8 321

Operative EBIT 3.5 7.2 -51 8.6 15.5 -45 25.9

Operative EBIT, % 4.4 8.5 - 5.5 9.1 - 8.1

Cash flow -8 1 - -10 -18 - -5

Operative EBIT decreased to

EUR 3.5 million (7.2) • Price pressure in the market

• Increased R&D spend to accelerate

the differentiation

• Variable costs started to come down towards

the end of the quarter


Investing to meet customer challenges

Challenges Oil & Mining applications

Process efficiency/Increased energy demand Horsepower Reduction in Wet/Dry Shale Hydraulic

Fracturing , Oil Sands, Cementing

Declining reserves Pelletization, Flotation,

EOR

Water scarcity Water Reuse, Scale and Microbiological Control, Shale

Water Management

Environmental concerns Tailings Management, Shale Water Reuse,

Contaminants Removal

Key differentiated products Polymers, Biocides, Defoamers, Scale Inhibitors,

Dispersants

Targeting innovation sales* of EUR 100 million in 2016

*) Sales from new products or existing products for new applications launched within the previous 5 years


ChemSolutions revenue was impacted by the food and pharmaceuticals businesses divestment

April-June 2013

Revenue decreased 16% to

EUR 46 million (55) • Organic growth 7%, continued strong sales volumes

growth of formic acid and derivatives product lines

• Divestment of food and pharmaceuticals businesses

had -22% impact

EUR million Q2/2013 Q2/2012 % 1-6/2013 1-6/2012 % 2012

Revenue 46 55 -16 107 114 -6 228

Operative EBIT 1.1 0.7 57 9.9 6.5 52 15.1

Operative EBIT, % 2.4 1.3 - 9.2 5.7 - 6.6

Cash flow -4 -2 - 77 13 - 24


EUR 1.1 million (0.7) • Higher sales volumes and lower variable costs

• Strong market pressure on Sodium Percarbonate

product line


Key figures and ratios

EUR million (except ratios) 4-6/2013 4-6/2012 % 1-6/2013 1-6/2012 % 2012

Revenue 569.3 562.3 1 1,130.2 1,115.2 1 2,240.9

Operative EBITDA 61.5 58.2 6 125.0 121.0 3 249.4

of which margin 10.8 10.3 - 11.1 10.8 - 11.1

Operative EBIT 40.0 36.0 11 82.2 74.6 10 155.5

of which margin 7.0 6.4 - 7.3 6.7 - 6.9

Share of profit or loss

of associates

0.1 5.8 - -1.1 16.6 - 11.2

Financing income and expenses -4.2 1.4 - -28.9 -8.9 - -15.7

Operative EPS, EUR 0.14 0.21 -33 0.31 0.41 -24 0.77

Operative ROCE* 10.4 10.5 - 10.4 10.5 - 10.0

Capital expenditure 30.9 51.0 -39 59.9 70.4 -15 134.1

Casf flow after investing

activities**

10.5 24.2 -57 200.4 16.1 - 71.8

Gearing, % at period-end 36 44 - 36 44 - 42

Personnel at period-end 4,664 5,181 -10 4,664 5,181 -10 4,857

*12-month rolling average

**2012 numbers include EUR 5.3 million dividends and EUR 27.3 million paid-in-capital from JV Sachtleben. 1-6/2013 numbers include EUR 97.5 million received from the

divestment of the JV Sachtleben shares and EUR 80.6 million from the divestment of the food and pharmaceuticals businesses.


2013

Revenue (local currencies

and excl. divestments)

2014 2016

Operative EBIT

0%-5% growth vs 2012

EBIT margin 10%

Revenue

EBITDA margin

Gearing

EUR 2.6 – 2.7 billion

15%

below 60%

increase >15% vs 2012

Outlook for 2013 and financial targets for 2014 and 2016 unchanged


Kemira Capital Markets Day Tuesday 10 September 2013 in London, UK (London Stock Exchange)

12.00 Lunch and registration

12.30 Presentations

• From redesign to expansion (Wolfgang

Büchele, President and CEO)

• M&I turnaround and efficiency improvements

(Frank Wegener, M&I and Michael

Löffelmann,

SVP restructuring and strategic projects)

• Innovation, incl. R&D showcases (Heidi

Fagerholm, CTO and R&D management)

15.30 Breakout meetings

• Four teams (CEO & CFO, Paper and APAC,

Oil & Mining and SA, M&I and efficiency)

18.00 Cocktails


http://www.facebook.com/kemiragroup

http://www.linkedin.com/company/7400

http://twitter.com/kemiragroup

http://www.youtube.com/kemiragroup

Appendix

Kemira Interim report January-June 2013


Good balance between sales and raw material prices Kemira sales prices vs variable costs

*) 12-month rolling change vs previous year, meur, excl. Tikkurila and Pigments

-150

-100

-50

0

50

100

150

200

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

2007 2008 2009 2010 2011 2012 2013

Brent oil, USD Sales price* Variable costs*


YTD 2013 operative EBIT bridge

Kemira Group operative EBIT bridge, EUR million

0

10

20

30

40

50

60

70

80

90

100

YTD 2012 Sales volumes Sales prices Variable costs Fixed costs Currency impact Others, incl.acquisitions and

divestments

Q2 2013

74.6 17.0 82.2 4.2 3.2 -9.1 -5.7 -2.0


”Fit for Growth” will improve EBIT by EUR 60 million in 2014

• Cost savings impact in operative

EBIT in Q2 2013 was EUR 10 million

– EUR 4 million impacted variable costs

– EUR 6 million impacted fixed costs

• Expected cost savings impact in

operative EBIT 2013 is approximately

EUR 50 million

• Expected cost savings impact in

operative EBIT 2014 EUR 60 million

”Fit for Growth” status Q2 2013,

EUR million

50

60

10

19

0

10

20

30

40

50

60

70

Savings impact2012

Savings impact2013

Savings impact2014

Expected savings Realized savings


”Fit for Growth” required EUR 76 million in restructuring costs

• EUR 5 million booked YTD 2013

• Total non-recurring severance payments and external services EUR 46 million

• Total non-recurring asset write-downs EUR 30 million

41

30

5

0

15

30

45

Severance payments and external services2012

Asset write-downs 2012 Severance payments and external services2013

Realized restructuring charges,

EUR million


Fixed costs are approximately 25% of revenues

• Fixed costs include personnel

expenses, maintenance cost and leases

• Expected ”Fit for Growth” savings

approximately EUR 50 million in 2013

• Efficiency improvements and operating

leverage compensating the annual cost

inflation of around 3%

• TOP 10* raw materials account for

45% of raw material spend

Kemira cost breakdown

EUR million

*) From 1 to 10: Acrylic Acid, Cationic monomer, Acrylonitrile, Fatty acid, Petroleum solvents, Propionic acid, Aluminium Hydrate, Sodium hydroxide, Sulphuric acid, Hydrochloric acid

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2010 2011 2012

Raw materials Logistics Energy Fixed costs


Cash flow statement

EUR million Q2 2013 Q2 2012 1-6/2013 1-6/2012 FY 2012

Operative EBITDA 61.5 58.2 125.0 121.0 249.4

Change in net working capital -6.8 -0.6 -11.1 -43.2 -21.1

Cash flow from operations* 38.6 47.5 78.9 57.9 176.3

Capital expenditure -30.9 -51.0 -59.9 -70.4 -134.1

Other investing activities 2.8 27.7 181.4 28.6 29.6

Cash flow after investing activities* 10.5 24.2 200.4 16.1 71.8


*2012 numbers include EUR 5.3 million dividends and EUR 27.3 million paid-in-capital from JV Sachtleben. 1-6/2013 numbers include EUR 97.5 million

received from the divestment of the JV Sachtleben shares and EUR 80.6 million from the divestment of the food and pharmaceuticals businesses.

Market and product specifications

Kemira Interim report January-June 2013


1.5 1.7 1.9 2.0 2.1 2.2

0.9 1.0

1.1

1.8 2.0

2.3 1.5

1.6 1.8

2012 2016 2020 2012 2016 2020

Defoamers, biocides and other wet-end process chemicals

Paper segment - Demand for sizing and strength chemicals is growing fastest globally

Pulp and paper industry trends increasing

chemical demand:

• Increased use of recycled fibres

• Hardwood replacing softwood in virgin

pulp

• Lightweighting of packaging and board

grades

• Higher filler loads in graphic papers

• New digital printing methods

• Lower water / energy consumption

Market size,

EUR billion (CAGR: 2.4%)

GAGR

Sizing and strength

Miscellaneous commodity chemicals

Bleaching chemicals

Polymers

3.5%

2.0%

3.0%

1.3%

2.0%


Paper segment - Technology and market leader in paper wet-end chemistry

Value chain part covered by Kemira

RAW

MATERIALS INTERMEDIATES PRODUCTS APPLICATIONS

CUSTOMER

IDUSTRIES CUSTOMERS

Electricity

Sodium chloride

(salt)

Crude tall oil

Cationic monomer

Acrylonitrile

Acrylic acid

Olefins

Fatty acids

Maleic anhydride

Sulfur

Tall oil rosin

AKD Wax

Isomerized olefins

Acrylamide

Sodium chlorate

Hydrogen peroxide

Polymers

Defoamers

Coagulants

Biocides

Sizing

Strength Additives

Surface additives

Colorants

Sulfuric acid

Pulping

Bleaching

Retention

Wet-end process

control

WQQM

Sizing

Strength

Surface treatment

Coloring

Pulp

Packaging

and board

Printing

and writing

Tissue

All the major

global paper

and pulp

producers


Oil & Mining segment - Strong market growth across all product lines

• High oil price spurs demand for

identifying new sources

• Global growth of shale gas and wet

shale

• Declining ore assays require improved

processing

• Increasing environmental pressure

which increases demand for waste

water treatment

Market size,

EUR billion (CAGR: 4.7%)

3.1 3.6 4.3

2.0 2.4 2.9

4.3

5.1

6.1

2012 2016 2020 2012 2016 2020

Polymers Defoamers, biocides

and other process

chemicals

Miscellaneous

commodity

products


Oil & Mining segment - Winning market share with competitive combination of innovation chemicals and application knowledge


RAW

MATERIALS INTERMEDIATES PRODUCTS APPLICATIONS CUSTOMERS

Acrylonitrile

Acrylic acid

Various monomers

Miscellaneous

specialty chemicals

and commodities

Acrylamide Polymers

Dispersants &

Antiscalants

Biocides

Emulsifiers

Defoamers

Coagulants

Formulations

Friction Reduction

Formation & Well Scale

Control

Asset integrity Microbial

Induced Corrosion

Enhanced Oil Recovery

Drilling muds

Concentrate thickening

Mineral slurry

preservation

Mining processes

Scale Control

Pumpers

Oil & Gas

operators

Service

companies

Mine operators


Municipal & Industrial - Commodity product lines expected to grow, but slightly slower than the market

Demand drivers for raw and waste water as well as sludge treatment chemicals:

• Legislation and regulatory enforcements determine required treated water and

sludge quality standards

• Water reuse is most cost efficient solution to meet the increasing water demand

2.6 3.0 3.4

1.6 1.8 1.9

3.4 3.8

4.4

2012 2016 2020 GAGR

Coagulants Antiscalants, biocides, defoamers, miscellaneous commodity chemicals

3.2%

2.8%

3.3%

Polymers

Realized restructuring charges,

EUR billion


Municipal & Industrial - Technology and market leader in raw and waste water as well as sludge treatment • Kemira is the only major supplier producing major water treatment chemicals, polymers and coagulants – thereby

enabling comprehensive application support

• Cost competitiveness through backward integration into virgin raw materials

• 60-70% of sourced raw materials are recycled utilizing waste streams from industrial producers, providing an

additional cost advantage

RAW

MATERIALS INTERMEDIATES PRODUCTS APPLICATIONS SALES CHANNEL CUSTOMERS

Acrylonitrile

Sulfuric acid

Hydrochloric acid

Aluminium hydrate

Iron ore

Pickling liquor

Copperas

Acrylamide Polymers (EPAM, DPAM)

Al Coagulants

Fe Coagulants

Antiscalants

Biocides

Defoamers

Raw water treatment

Wastewater treatment

Sludge treatment

Advanced water treatment

Direct sales

Distributor/reseller

Service companies

Municipalities

Private operators

Industrial customers



http://www.facebook.com/kemiragroup

http://www.linkedin.com/company/7400

http://twitter.com/kemiragroup

http://www.youtube.com/kemiragroup

Investor Relations

Kemira's January-June 2013 Interim Report result presentation