October 2017 Investor Presentation Kemira – Targeting for profitable growth • Kemira today (slides # 2-11) • Latest news and financials (# 12-35) Investor presentation • Pulp & Paper (# 36-44) • Industry & Water (# 45-52) - Oil & Gas (# 53-57) • Appendix (# 58-63)
Kemira in brief FY2016: Revenue EUR 2,363 billion, Operative EBITDA EUR 302.5 million, margin 12.8% SEGMENT SPLIT GEOGRAPHIES PRODUCTS 25% Bleaching 10% and pulping 20% Other: APAC 38% 38% e.g. defoamers, 1.China Industry AMERICAS dispersants, 2.Indonesia & Water 1.USA and biocides 3.South 2.Canada #1 in water Korea 20% 3.Brazil treatment in 52% Coagulants NA and EUROPE Europe 62% 1.Finland 15% Sizing Pulp & #1 in shale 2.Sweden and strength 20% Paper in NA 3.Germany Polymers #1 globally Revenue by product category rounded to the nearest 5% CUSTOMERS Examples of largest customers Municipalities, e.g. Frankfurt 8,000 Sold-to customers London New York City 16,000 Ship-to customers Paris Shanghai Singapore Investor Presentation - October 2017 2
Kemira has managed to improve EBITDA even with the downturn in the oil & gas market Revenue Operative EBITDA and operative EBITDA margin EUR million EUR million 2446 2373 2363 2229 303 301 2137 287 253 252 12.8% 12.3% 12.1% 11.8% 11.3% 2013 2014 2015 2016 LTM 2013 2014 2015 2016 LTM Between 2014-2016, Oil & Mining revenue and operative EBITDA dropped EUR 70 million and EUR 30 million respectively LTM = Last Twelve Months ending September 2017 Investor Presentation - October 2017 3
Pulp & Paper – market leader with solid track record REVENUE AND REVENUE BY CUSTOMER REVENUE BY OPERATIVE EBITDA TYPE AND MARKET GROWTH PRODUCT CATEGORY 1457 20% 10% 1417 35% 40% Printing & Other 1170 10% 1068 1047 195 writing papers Bleaching Board & Polymers 171 & pulping tissue 40% 137 130 Pulp 109 20% Defoamers, dispersants, Market 25% biocides and other 1-2% 2-3% -1-2% growth 2012 2013 2014 2015 2016 process chemicals Sizing & strength MARKET ENVIRONMENT REVENUE BY GEOGRAPHIES AND CUSTOMER EXAMPLES MARKET GROWTH BY REGION 15% Kemira (pulp and paper) #1 50% APAC BASF (paper) # 2 35% EMEA Americas Solenis (paper) # 3 AkzoNobel (pulp) # 4 Market Ecolab (paper) # 5 0-1% 0-1% 2-3% growth Note: Revenue by industry, product and geography rounded to the nearest 5% Investor Presentation - October 2017 4
Industry & Water – strong positions in chosen categories MARKET POSITION REVENUE BY APPLICATION REVENUE BY TYPE AND MARKET GROWTH PRODUCT CATEGORY Market share in water 20% 15% 45% treatment in Europe and 30% Other products Other 15% Coagulants such as North America 70% Oil & Gas defoamers Water treatment and biocides Market share in polymers used for friction reduction >30% in US shale fracking 35% Market 2-3% 5-6% 2-3% Polymers growth REVENUE AND ORGANIC GROWTH (Y-O-Y) REVENUE BY GEOGRAPHIES AND CUSTOMER EXAMPLES EUR million MARKET GROWTH BY REGION Industrial (60%), Municipal (40%), 5% -7% -5% -5% 0% +6% +9% +15% customer examples customer examples 55% APAC 259 248 40% Los Angeles EMEA Amsterdam 238 231 Montreal Barcelona 228 Americas 227 220 New York City Frankfurt Toronto London Oslo Melbourne Q1 Q2 Q3 Q4 Q1 Q2 Q3 Paris Shanghai Market 3-4% 3-4% 5-6% Stockholm Singapore growth 2016 2017 Note: Revenue by industry, product and geography rounded to the nearest 5% Investor Presentation - October 2017 5
Our targets and actions for profitable growth ACQUISITIONS ORGANIC GROWTH Very selective approach • • Strategic and synergistic fit Investments in capacity expansion • • Accretive to profitability Seize opportunities in growth pockets • • Reasonable valuation Shale oil & gas business • CEOR and oil sands • Digitalization • Above-the-market APAC • R&D, new products growth and operative EFFICIENCY EBITDA of 14-16% • Manufacturing footprint OPERATING COST and utilization optimization DISCIPLINE • BOOST – Operational excellence Prudent cost culture • Organizational efficiencies with new structure • Complexity reduction • Efficient processes Investor Presentation - October 2017 6
Our key actions to improve margins Operative EBITDA margin 14-16% Advanced Market and Chemical Water raw material Enhanced Oil sands Treatment related Oil Recovery Optimization volatility 12.8% of operations: Acquisition 12.3% New in China majority of 12.1% Efficiencies bleaching savings in AkzoNobel’s from new chemical Logistics paper two segment capacity chemicals structure (Joutseno, business Finland) 2015 2016 2017 LTM Acquisition Group Pulp & Pulp & BOOST - Industry & Industry & Industry & Volatility Mid- to synergies Paper Paper operational Water Water Water long-term excellence target Estimated end of 2017 run-rate 100% 100% 75% 0% Low 25% Low Low Full run-rate by EO 2017 EO 2017 2018 1-2 yrs 1-2 yrs 2-3 yrs 2-3 yrs 3-5 yrs LTM = Last Twelve Months ending September 2017 Investor Presentation - October 2017 7
Progress in profitable growth Opening / expansion of site Acquisition Operational efficiencies Closure of site Start-up of Joutseno (FI) chlorate 11.3% 12.8% expansion 2013 operative 2016 operative Transportation EBITDA EBITDA agreement with Q3 Start-up of Ortigueira Odyssey 17 (BR) sodium chlorate site Q2 and announcement of 17 Q1 Joutseno (FI) expansion 17 Acquisition of Soto Q4 Acquisition BASF Opening of 16 Industries (US) Q3 AKD emulsion business Nanjing (CN) 16 Announcement AkzoNobel’s Q2 Odyssey go-live site of acquisition 16 Q1 paper chemicals in North America via JV in China 16 Opening of Tarragona acquisition Q4 Bradford (UK) coagulant site (ES) 15 Q3 expansion Two segment 15 Q2 structure San Giorgio (IT) 15 Q1 Acquisition operational expansion 15 Q4 of Polymer Q3 14 Services (US) Expansion of Closures of Ottawa (CA) 14 Q2 pulp chemicals, and Zaramillo (ES) Q1 14 Closure of Oulu (FI) 14 Soave (IT) Botlek (NL) Expansion of dry and emulsion modernization Closure of Opening of EMEA polyacrylamide Longview (US) BOOST operational service center (US) excellence program launch Investor Presentation - October 2017 8
Kemira’s relevant market expected to show healthy growth Market growth by business areas: Pulp & Paper 1%, Water treatment 2-3%, Oil & Gas 5-6% p.a. Long-term drivers for growth, including: Relevant target market (EUR billion) • E-commerce drives the need for packaging material ~23 +3% • Growing middle class, increased standards of living ~20 and urbanization leads to higher usage of water, 2-3% energy, tissue, and board • Recycling and use of renewables leads to e.g. higher Americas usage of strength chemicals • Regulation increases water treatment 2-3% • Scarcity of resources accelerates need to produce more with less EMEA Challenges 3-4% • Risks to global GDP growth APAC • Decline in demand for printing and writing paper demand 2017 2022 CAGR 2017-2022 Management estimation based on various sources Investor Presentation - October 2017 9
Innovation sales on track – pipeline strong Sales from new products (launched within the last 5 years) 300 9% 8% 8% 250 7% 200 5% 150 Best selling new products in 2016 100 1. Oil & Gas – Freeze tolerant friction reducer 50 2. Oil & Gas – Stabilizing additives for 0 CEOR polymers 2012 2013 2014 2015 2016 3. Pulp & Paper – of Group’s revenue from new products Strength for tissue Investor Presentation - October 2017 10
Kemira offers stable and competitive dividends • Kemira’s dividend policy is to pay 0.53 0.53 0.53 0.53 0.53 0.53 a stable and competitive dividend • Kemira has paid dividends every year since listing of shares in 1994 5.8% 4.5% 4.4% 5.4% 4.9% 4.4% • Kemira offers attractive dividend yield – Average dividend yield in relevant indices • EuroStoxx Chemicals 2.3% • OMX Helsinki 25 3.5% 2011 2012 2013 2014 2015 2016 Dividend per share Dividend yield Kemira’s dividend yield calculated using the share price at year-end Investor Presentation - October 2017 11
Latest news and financials
Key financial and operational highlights Q3 2017 Q3 2017 EUR million Q3 Q3 • Revenue and operative EBITDA Δ % (except ratios) 2017 2016 improvement driven by Oil & Gas Revenue 622.2 596.3 +4 – Good organic growth – Group +7% Operative EBITDA 84.5 80.8 +5 – Volume growth led to higher operative EBITDA of which margin, % 13.6 13.6 - – Net profit impacted by EUR 13 million Operative EBIT 47.7 46.5 +3 settlement for damage claim related to alleged infringement of competition law of which margin, % 7.7 7.8 - during 1994-2000 Net profit to equity • First full quarter for new two segment 18.4 25.6 -28 owners structure with benefits becoming visible EPS, EUR 0.12 0.16 -28 • Hurricanes had only limited impact Investor Presentation - October 2017 13
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