profitable water pure-play Structural changes starting to deliver - PowerPoint PPT Presentation

Wolfgang Büchele, President and CEO Kemira Capital Markets Day 2013, September 10 Delivering a profitable water pure-play

Structural changes starting to deliver results LEAN Performance manufacturing Stringent Lean management capital allocation operation New organization system Process structure architecture Segment roles: Compensation growth and/or cash focus Fit for Growth structure +35% Equity value 3F acquisition Sachtleben divestment Net debt Food and pharmaceuticals -28% business divestment Q2 2012 CMD Result 2013 Kemira Capital Markets Day 2013 2

Managing businesses from their growth regions Oil & Mining management based Paper management in Atlanta, US relocating from Helsinki to Hong Kong Municipal & Industrial management relocating from Helsinki to Frankfurt EMEA Paper management relocating from Helsinki to Frankfurt Kemira Capital Markets Day 2013 3

Differentiated products together with balanced wet and dry shale portfolio driving revenue recovery in Oil & Mining 15% reduction in total number of US oil (+17%) and gas Oil & Mining revenue increasing sequentially EUR (-56%) rigs in 2013 compared to January 2012 despite decreased oil and gas drilling activity million Differentiated products share of revenue 1,600 82 # of Oil rigs increasing to 82% 82% in the US* 1,400 80 +5% 1,200 78 1,000 76 +6% 800 74 # of Gas rigs 600 in the US* 72 400 70 200 0 68 Jan 2012 Jun 2012 Dec 2012 Mar 2013 Jun 2013 2012 Q4 2012 Q1 2013 Q2 2013 *) Source: Baker Hughes International Kemira Capital Markets Day 2013 4

Restructuring initiatives improving profitability in Municipal & Industrial Revenue, EUR million 9.2% 800 687 700 665 7.1% 644 Operative 600 EBIT margin 500 7.1% 400 343 Others 5.7% 300 Polymers 200 Coagulants 100 0 2010 2011 2012 1-6 2013 Kemira Capital Markets Day 2013 5

No change in outlook for 2013 or financial targets for 2014 and 2016 2014 2016 2013 Revenue (local currencies and excl. divestments) 0%-5% growth vs 2012 increase >15% vs 2012 Operative EBIT EBIT margin 10% EUR 2.6 – 2.7 billion Revenue EBITDA margin 15% Gearing below 60% Kemira Capital Markets Day 2013 6

Fit for Growth helping to deliver 2013 profit target* 2012-2013 Fit for Growth savings 15 Fit for Growth savings, EUR million expected to be EUR 10 15-20 million higher in H2 2013 vs H2 2012 5 10 9 7 3 0 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Input prices Propylene price trend trending up 1300 0.80 0.70 1150 0.60 1000 0.50 850 0.40 1/12 2/12 3/12 4/12 5/12 6/12 7/12 8/12 9/12 10/1211/1212/12 1/13 2/13 3/13 4/13 5/13 6/13 EU (EUR/MT, ICIS) NA (USD/pound, CMAI) *) Revenue in local currencies, excl. divestments 0%-5% growth vs 2012, Operative EBIT +15% vs 2012 Kemira Capital Markets Day 2013 7

External indicators show stable economic development in EMEA and NAFTA, uncertainty in emerging markets Kemira early warning dashboard Indicators Status Trend Change Lead 1 Overall WTI crude oil futures (9/13) 6 4 OECD + Emerging market bus. confidence index (6/13) 4 FOEX China BHKP pulp (9/13) Chicago fed nat. activity (7/13) 8 EMEA 6 IFO manufacturing business expectations (8/13) Eurozone PMI survey (8/13) 6 NA 4 S&P 500 index (9/13) ISM business supplier deliveries (8/13) 6 SA 6 Brazil industry production % growth (6/13) Brazil company leading indicator (6/13) 6 APAC 8 Major 5 Asia companies leading indicator (6/13) China containerized freight index (8/13) 2 Normal: indicator moves within standard deviation corridor Contracting: indicator has decreased for at least 3 consecutive months Trend Above: indicator moves above standard deviation corridor Expanding: indicator has increased for at least 3 consecutive months Below: indicator moves below standard deviation corridor 1. Lead time is the estimated time (months) between movement of indicator vs. resultant 2. Average new order value (3 months rolling) Kemira Capital Markets Day 2013 8

Operative EBIT margin target of 10% in 2014 2013-2015 Quarterly operative EBIT bridge, EUR million 10% 7% 55 4 1 5 5 40 Q2 operative EBIT 2013 Excluding one off Fit for Growth M&I restructuring Additional efficiency Average quarterly EBIT, expenses in full run rate measures including all the Q2 2013 (Vaasa, BSC, announced efficiency 3F synergies) measures Fixed cost inflation is expected to be compensated through additional benefits from LEAN manufacturing roll-out, further M&I turnaround measures and growth Kemira Capital Markets Day 2013 9

Capital allocation focusing on growth markets 2013-2015 and product lines Targeted payback time for new greenfield investments is max. 7 years and max. 5 years for capacity additions on existing products Focus on Paper in China, strengthening Oil & Mining in mature markets, South America, Middle East and Africa Capex split average Targeted capex split Capex-to-sales ratio 2010-2012 2016 Differentiated products 6.0% 5.0% 35% 30% 70% 65% Commodity products 2012 2016e Kemira Capital Markets Day 2013 10

Acquisitions expected to contribute to growth target 2013-2015 • Current 36% gearing means EUR 280 million headroom against the targeted <60% gearing • Strict M&A criteria for focused growth – Must strengthen our market position and/or our technologies/competencies – EBIT accretive in second full year after closing • 3F acquisition demonstrates Kemira’s M&A strategy – Accessing technologies lacking in the portfolio (e.g. monomers) – Accelerating geographical expansion in order to shorten the strategic path (e.g. dry polyacrylamides in the US) Kemira Capital Markets Day 2013 11

Portfolio focus shifting from commodity 2013-2015 to differentiated business Positioning based on 2 years performance Profitability O&M NAFTA Paper SA M&I Paper EMEA O&M NAFTA EMEA M&I Paper Paper NAFTA EMEA Evaluating exit CS M&I APAC options APAC M&I SA Revenue growth O&M O&M SA APAC Kemira Capital Markets Day 2013 12

Portfolio restructuring improving return on 2013-2015 capital employed June Ambition 2013 in 2016 Goodwill 520m Lower Other intangible assets* 58m Unchanged >30% Property, plant and equipment* 650m 5% capex to sales target in 2016 higher Investment in associates 2 Unchanged LEAN manufacturing and SKU NWC 11.3% 11%-11.5% reduction Operative EBIT margin 1-6 2013 7.3% ~11% Fit for Growth and continuous Operative ROCE, efficiency measures 10.4% >15% rolling 12 months *) Prepayments (see note 13 in the Financial Statements 2012) of EUR 111 million are excluded from Kemira operative ROCE. Kemira Capital Markets Day 2013 13

Innovation focusing on Paper and Oil & Mining 2015-2017 Technology Management R&D projects per New Board targeting 50% Product Development stage reduction in development Development Scale-up times for ”R” and ”D” ChemSolutions ChemSolutions Municipal Municipal projects & Industrial & Industrial Dedicated global team and structured process Paper to drive ideation Oil & Mining Paper Oil & Mining Kemira Capital Markets Day 2013 14

2017-2020 Heading towards remote control and combining waste water treatment with energy generation Energy and clean water from waste by Microbial Remote control and monitoring of water management: Fuel Cell assisted water treatment serving industries from a central location Kemira Capital Markets Day 2013 15

Renewed revolving credit facility further improves financial position and secures future growth financially Debt per June, 2013 Kemira average interest rate (at the end of the period) Gross debt: 5.0% 4.3% EUR 565 million 4.0% 3.0% 1.7% 2.0% 2.0% Net Debt: 1.6% 2.0% 1.7% EUR 425 million 1.0% Net Debt/Annualized 0.0% operative EBITDA 2008 2009 2010 2011 2012 6/2013 YTD 2013: 1.7 Debt maturity profile, EUR million 2013 2014 2015 2016 2017 2018 2019 2020 2021 >2022 Gross debt maturing in 0 2013 relates mainly to -100 commercial papers -200 issued on the Finnish -300 markets -400 -500 Gross debt Undrawn EUR 400 million 5+1+1 year Revolving Credit Facility Kemira Capital Markets Day 2013 16

Dividend policy remains unchanged Dividend policy is to distribute a dividend that is 40%- 60% of Kemira’s operative net profit Dividend yield has on average been over 4% in 2005-2012 (leading yield in the European chemical sector) 69% 61% 60% 59% 53% 42% 39% 36% 38% 37% 2009 2010* 2011 2012 2013** Gearing Payout ratio *) In addition in March, 86% of Tikkurila shares were distributed as dividend to Kemira shareholders (Tikkurila market capitalization was EUR 600 million after its listing) **) Gearing at the end of June, 2013 Kemira Capital Markets Day 2013 17