JARI ROSENDAL, PRESIDENT AND CEO PETRI CASTRÉN, CFO JULY 19, 2019 Strong earnings improvement continued in Q2 JANUARY-JUNE 2019
Key points in Q2 2019 • Focus on value over volume continued • Strong profitability improvement despite some softness in the market • Growth investment projects in China and the Netherlands expected to be ramped-up by year-end JULY 19, 2019 Q2 2019 RESULTS 2
Key financial highlights Focus on value over volume EUR million Q2 Q2 Δ% FY Intention to drive profitability resulted in some • (except ratios) 2019 2018 2018 lost volumes Revenue 647.6 +2 2,592.8 663.6 Oil & Gas organic growth +30% • Operative EBITDA 106.1 80.2 +32 323.1 Operative EBITDA +32% to margin of 16.0% of which margin 16.0% 12.4% 12.5% Improved product mix • • Effective price and cost management combined Operative EBIT 60.3 45.1 +34 173.8 with favorable raw material price development of which margin 9.1% 7.0% 6.7% IFRS 16 impact EUR +8.3 million in Q2 • Net profit 35.2 23.5 +50 95.2 • Favorable currency development Operative EBIT +34% to margin of 9.1% EPS, EUR 0.22 0.14 +54 0.58 JULY 19, 2019 Q2 2019 RESULTS 3
Pulp & Paper – profitability improving Market environment REVENUE AND ORGANIC REVENUE GROWTH (Y-ON-Y) EUR million Some short-term softness in the market • 390 385 381 376 373 373 372 Organic growth -3% 369 369 363 • Intentional focus on improving product mix 0% +1% +2% +5% +5% +6% +7% +4% +0% -3% Exit of ECOX business impacted sales volumes • Operative EBITDA margin 14.4% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 • Value over volume visible also in EBITDA and 2017 2018 2019 EBIT leading to improved profitability OPERATIVE EBITDA AND OPERATIVE EBITDA-% Cost savings initiated – related one-time costs • EUR million recognized in Q2 12.4% 13.0% 13.4% 14.9% 11.6% 12.1% 13.6% 13.1% 13.3% 14.4% • *IFRS 16 impact EUR +3.2 million in Q2 and EUR 55.4 53.7 52.3 51.2 50.7 47.8 48.5 +6.5 million in H1 46.0 45.4 42.7 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1* Q2* 2017 2018 2019 JULY 19, 2019 Q2 2019 RESULTS 4
Industry & Water – exceptional profitability Market environment REVENUE AND ORGANIC REVENUE GROWTH (Y-ON-Y) EUR million Water treatment market solid • 290 284 272 271 267 264 259 248 245 238 • Oil & gas shale market growth rate slowing in the short-term Organic growth +4% +6% +9% +15% +20% +11% +14% +11% +2% +4% +5% Our Oil & Gas business had strong organic • growth, +30% to EUR 77 million, partly driven by Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 oil sands tailings treatment business 2017 2018 2019 Focus on key customers • OPERATIVE EBITDA AND OPERATIVE EBITDA-% EUR million Operative EBITDA margin exceptionally high 16.8% 18.1% 18.1% 13.9% 9.6% 10.9% 12.8% 12.9% 12.3% 52.4 11.8% Favorable product mix and polymer raw material • 45.0 9.6% price development 36.7 36.0 34.8 33.3 29.3 26.6 25.3 22.9 • *IFRS 16 impact EUR +5.0 million in Q2 and EUR +9.4 million in H1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1* Q2* 2017 2018 2019 JULY 19, 2019 Q2 2019 RESULTS 5
Safety record on the right track – target has to be zero injuries Clear improvement in safety Total Recordable Injuries Frequency # of injuries per 1 million hours (Kemira Employees and Contractors in our facilities) • We have 5,067 employees and annually 1,000-1,200 7.2 contractors working with us 5.8 We produce some 5.3 Mton of products at 64 • 3.9 manufacturing sites in 28 countries every year 3.5 3.4 2.5 • We deliver nearly 1,000 shipments daily by road, rail and sea • Our TRIF is 2.5, including own employees and 2014 2015 2016 2017 2018 2019 YTD contractors Lost Time Injuries Frequency # of injuries per 1 million hours Our LTIF of 1.5 is among the best of the global • (Kemira Employees and Contractors in our facilities) chemical companies* 2.7 2.7 2.2 2.0 1.5 1.5 *Based on the ICCA (the International Council of Chemical Associations) database and the latest reported company data 2014 2015 2016 2017 2018 2019 YTD JULY 19, 2019 Q2 2019 RESULTS 6
Strategy in brief HOW KEMIRA CREATES VALUE OUR MARKET BUILDING A GREAT EXECUTION – VALUE FOCUS CHEMICALS COMPANY OVER VOLUME Chemicals for Pulp & Paper, Great products: Improving product and market mix Oil & Gas and Water Treatment 4 core areas are polymers, coagulants, Focusing on capital efficiency sizing and bleaching chemicals which meet #1 or #2 in our core markets our customers’ needs incl. resource efficiency Investing selectively in core Market growth estimated to be 2-3% p.a. product areas with higher return Great operations: supported by higher use of fiber-based on capital employed Deliver reliably with consistent quality products, resource efficiency and regulation Great people: Deep application expertise and innovation capability FINANCIAL TARGETS (mid- to long-term) Above the market revenue growth • Operative EBITDA 15-17% • Gearing below 75% JULY 19, 2019 Q2 2019 RESULTS 7
Key operative focus areas in H2 2019 1. Active price management 2. Modify product & service offering to cater better profitable growth 3. Improve operational excellence 4. Ramp-up CEOR* polymer capacity addition in the Netherlands 5. Start-up new AKD sizing manufacturing site in China 6. Construction of emulsion polymer capacity in the US on time and in budget, start-up expected beginning of 2021 7. Prudent cost-control in all areas *CEOR, chemical enhanced oil recovery JULY 19, 2019 Q2 2019 RESULTS 8
PETRI CASTRÉN, CFO JULY 19, 2019 Financials Q2 2019 JULY 19, 2019 Q2 2019 RESULTS 9
Successful pricing drives improvement REVENUE AND ORGANIC GROWTH (Y-ON-Y) Operative EBITDA margin 16.0% EUR million Focus on value over volume is bearing fruit 0% • 664 +2% -4% +4% 648 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 +8.3 million in Q2 and EUR +16.0 million in H1 Q2 2018 Sales Sales Currency Acquisitions Q2 2019 volumes prices impact OPERATIVE EBITDA BRIDGE EUR million +5.7 -0.8 106.1 -8.3 -0.5 +4.8 97.8 +23.4 80.2 -6.6 Q2 Sales volumes Sales prices Variable costs Fixed costs Currency Other Q2 Adoption of "Pre IFRS 16 2018 impact 2019 IFRS 16 comparison" standard JULY 19, 2019 Q2 2019 RESULTS 10
Net impact of sales price & variable costs positive SALES PRICE VS VARIABLE COST TREND SALES PRICES AND VARIABLE COSTS (ROLLING 12-MONTH CHANGE Y-O-Y) (CHANGE Y-O-Y) EUR million EUR million 180 47 42 37 120 34 28 26 38 36 60 13 24 16 29 11 13 23 23 9 8 5 4 11 0 11 -9 3 0 -2 -2 -10 -3 -18 -4 -5 -60 -10 -23 -13 -16 -18 -20 -23 -23 -16 -120 -26 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 -180 2016 2017 2018 2019 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Net impact on EBITDA (sales prices-variable costs) Brent oil, USD Sales prices* Variable costs* Sales prices Variable costs * 12-month rolling change vs previous year in EUR million JULY 19, 2019 Q2 2019 RESULTS 11
Cash flow has improved clearly ALL KEY FIGURES IN EUR MILLION CASH FLOW FROM OPERATIONS • Cash flow supported by improved profitability 271 • Kemira’s Pension Fund Neliapila returned excess 210 205 capital of EUR 15 million to Group in Q1 122 • IFRS 16 impact EUR +14 million on cash flow from operations in H1 58 Typically cash flow is H2-weighted, especially due to • changes in net working capital 2016 2017 2018 H1 2018 H1 2019 CAPITAL EXPENDITURE EXCL. ACQUISITIONS 213 190 ◼ Growth capex In H1 the largest capital expenditures were related to • 150 polymer expansion in the Netherlands and new AKD 95 66 manufacturing site in China 44 68 CAPEX excl. acquisitions estimated to be around • 63 124 118 22 34 EUR 180-220 million in 2019 106 41 34 2016 2017 2018 H1 2018 H1 2019 JULY 19, 2019 Q2 2019 RESULTS 12
ROCE improving, adoption of IFRS 16 increased reported net debt OPERATIVE RETURN ON CAPITAL EMPLOYED ROCE improvement driven by Industry & Water • 10.8% 9.9% 9.8% 9.7% 9.7% Ongoing investment projects are expected to improve • Group’s ROCE once up and running 2016 2017 2018 Q2 2018 Q2 2019 LTM LTM NET DEBT (EUR million) AND LEVERAGE RATIO* 921 Increase in net debt resulted mainly from the • 773 741 adoption of IFRS 16 as operating leases (EUR 135 694 634 million) are part of debt Excluding IFRS 16 impact, net debt would have been – 2.1 2.2 2.3 2.5 2.5 EUR 786 million and leverage ratio 2.2 Average cost of net debt excluding leases is 1.9% • Dec 31 Dec 31 Dec 31 Jun 30 Jun 30 and duration is 27 months 2016 2017 2018 2018 2019 * Leverage ratio = Net debt / last 12 months operative EBITDA JULY 19, 2019 Q2 2019 RESULTS 13
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.” EUR 2014 2015 2016 2017 2018 2019 million outlook Operative 253 287 303 311 323 Increase EBITDA Operative EBITDA figures for 2014- 2018 are ”pre IFRS - 16”. JULY 19, 2019 Q2 2019 RESULTS 14
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