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Monday, 10 February 2014 10:00

Kemira Oyj's Financial Statements Bulletin 2013

This is a summary of the Financial Statements Bulletin of 2013. The complete Financial Statements Bulletin 2013 with tables is attached to this release and available at www.kemira.com/investors.

Fourth quarter: Major steps in strategic redesign accomplished. Organic growth and profitability improvement continues in the Paper segment

  • ŸOrganic revenue growth was 1% in local currencies. Reported revenue decreased 2% to EUR 545.2 million (558.5), due to unfavorable currency exchange rates.
  • Operative EBIT was EUR 34.5 million (34.1) with a margin of 6.3% (6.1%).
  • Divestment of coagulant business in Brazil closed and divestment of formic acid business as well as Danish distribution business signed.
  • The reported earnings per share were reduced to EUR -0.33 (-0.27) largely due to non-recurring items of EUR 76.5 million (61.1).

Full year: Sales volume growth and improved profitability, EUR 0.53 dividend proposed

  • Organic revenue growth was 3% in local currencies. Reported revenue was EUR 2,229 million (2,241).
  • ŸOperative EBIT increased  6% to EUR 164.2 million (155.5) with a margin of 7.4% (6.9%).
  • ŸEarnings per share, excluding non-recurring items decreased to EUR 0.70 (0.77) mainly due to the lower income from the associated companies.
  • ŸReported earnings per share were reduced to EUR -0.21 (0.12) mainly due to a write-down of EUR 23 million related to the divestment of the shares of Kemira's JV Sachtleben, lower income from associated companies and higher taxes.
  • ŸThe Board of Directors proposes a cash dividend of EUR 0.53 per share (0.53) to the Annual General Meeting 2014, totaling EUR 81 million (81), equivalent to 76% (69%) of the operative net profit.
  • ŸIn 2014, Kemira expects the revenue in local currencies, excluding acquisitions and divestments to be slightly higher than in 2013 and the operative EBIT to be higher than in 2013.

Kemira's President and CEO Wolfgang Büchele:

"Kemira's organic revenue and operative EBIT increased slightly in the fourth quarter.  Of the two growth focused segments, Paper with more than 10% organic revenue growth was able to improve its operative EBIT by more than 20%. By showing only modest 3% of organic growth at a disappointing profitability, Oil & Mining has not met our expectations. Thus, we have taken steps to bring Oil & Mining business back to its strategic path. In addition, we closed the acquisition of 3F, which will significantly strengthen our position in the polymer market. The profitability contribution of 3F in Q4 was lower than expected, due to a temporary shutdown in one of the production sites and higher costs mainly related to integration. The acquisition is expected to result in substantial synergies through raw material, logistics and fixed cost savings.

The revenue of Municipal & Industrial was partly impacted by the implementation of several strategic initiatives, including a new business model in EMEA and several divestments, which are all expected to improve the segment's profitability. The divestment of ChemSolutions' formic acid business is expected to close during the first quarter of 2014. In the fourth quarter, the organic revenue of ChemSolutions was impacted by the weak de-icing season.

Divestments, combined with the Fit for Growth measures have significantly reduced complexity and strengthened our balance sheet in 2013. These measures were required to be able to compete effectively in our core businesses, as well as to support our long-term profitability. Once the divestments are completed, Kemira has been transformed into a pure play company focusing on water quality and quantity management."

2014-02-10 091700

Definitions of key figures are available at www.kemira.com > Investors >
Financial information. Comparative 2012 figures are provided in parentheses for some financial results, where appropriate. Operating profit, excluding
non-recurring items, is referred to as Operative EBIT. Operating profit is referred to as EBIT.

Dividend

On December 31, 2013, Kemira Oyj's distributable funds totaled EUR 681,978,945 net profit, which accounted for EUR 141,177,720 for the period. No material changes have taken place in the company's financial position after the balance sheet date.

Kemira Oyj's Board of Directors proposes to the Annual General Meeting to be held on March 24, 2014 that a dividend of EUR 0.53 totaling EUR 81 million shall be paid on the basis of the adopted balance sheet for the financial year ended December 31, 2013.

KEMIRA'S FINANCIAL TARGETS, RESTRUCTURING PROGRAM "FIT FOR GROWTH" AND OUTLOOK 2014

Kemira will continue to focus on improving its profitability and reinforcing the positive cash flow. The company will also continue to invest in order to secure future growth in the water quality and quantity management business.

Kemira's financial targets have been revised in connection with its strategy update on April 23, 2013. The company's financial targets for 2016 are:

  • Ÿ  revenue EUR 2.6-2.7 billion
  • Ÿ  EBITDA-% of revenue 15%
  • Ÿ  gearing level < 60%.

In addition, Kemira expects its medium-term operative tax rate to be in the range of 22%-24%. The operative tax rate excludes non-recurring items and the impact of the income from associated companies.

The basis for growth is the expanding market for chemicals related to water quality and quantity management and Kemira's strong expertise in this field. The need to increase operational efficiency in our customer industries creates opportunities for Kemira to develop new products and services for both current and new customers. Research and Development is a critical organic growth enabler for Kemira and it provides differentiation capabilities in the water quality and quantity management markets. Kemira will invest in innovation, technical expertise, and competencies in the targeted focus areas.

Restructuring program "Fit for Growth"

Kemira Oyj has continued to implement its global restructuring program "Fit for Growth", launched at the end of July 2012 in order to improve the company's profitability, its internal efficiency and to accelerate the growth in emerging markets without sacrificing business opportunities in the mature markets. In 2012, the cost savings impact of "Fit for Growth" was EUR 10 million. In 2013, "Fit for Growth"-related cost savings were EUR 46 million nearly reaching the full cost savings run rate of EUR 60 million on an annualized basis at the end of 2013. "Fit for Growth" related savings will not be reported separately anymore in the coming Kemira interim reports.

Outlook

In 2014, Kemira expects its revenue in local currencies and excluding acquisitions and divestments to be slightly higher than in 2013 and its operative EBIT to be higher than in 2013.

The guidance for 2014 is defined as follows.

2014-02-10 091731

Press and analyst conference and conference call

Kemira will arrange a press conference for analysts and the media starting at 3.30 pm (1.30 pm UK time) at Kemira House, Porkkalankatu 3, Helsinki. In the conference, Kemira's President and CEO Wolfgang Büchele and the CFO Petri Castrén will present the results. The press conference will be held in English and will be webcasted at www.kemira.com/investors. Webcast will be available at www.kemira.com/investors also after the event. Presentation material will be available on Kemira's website at www.kemira.com/investors under Investors in English and at www.kemira.com/fi/sijoittajat in Finnish at about 3.00 pm.

Conference call in connection to the press and analyst conference

You can also listen to the conference live over the phone and attend the Q&A session via a conference call. In order to participate in the call, please dial ten minutes before the conference begins:
 

FI:    +358 9 81710467
SE:   +46 851 999352
UK:   +44 203 3645372

US:   +1 855 7532234

No PIN code requested.

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Kemira Oyj has lowered its operative EBIT guidance for the fourth quarter of 2013. Kemira's operative EBIT (excluding non-recurring items) was previously expected to be between EUR 42-50 million in the fourth quarter of 2013.

Kemira's updated guidance now indicates that operative EBIT is expected to be between EUR 34-35 million in the fourth quarter of 2013.

Main reasons for the lowered operative EBIT guidance for the fourth quarter of 2013 are as follows.

- Lower-than-expected contribution from 3F. Kemira closed the acquisition and started consolidation of 3F on October 1, 2013.

- Higher-than-expected fixed and inventory related costs, especially in the South America region.

- Increased pension fund related accruals and other pension costs in the EMEA region, mainly due to the ongoing relocation of certain business units.

Revenue guidance for 2013 remains as previously communicated. Kemira expects revenue in local currencies, excluding divestments to be slightly higher than in 2012. The revenue guidance for 2013 is defined as follows.

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Kemira will publish its Financial Statements Bulletin 2013 on February 7, 2014 at approximately 2.30 pm (CET+1).

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kem zelKemira's Board of Directors has appointed Jari Rosendal, 48, M. Sc. (Eng.) as Kemira Oyj's President and Chief Executive Officer as of May 1, 2014. Currently, Jari Rosendal holds a position as President, Americas region in Outotec Oyj based in Canada.

Jari Rosendal has held various positions in Outokumpu Group Technology Division between 1989 and 2006. He has been a member of Outotec Group Executive Board since 2006. He was the head of Minerals Processing Division until 2010 and then held the position as the head of Non-ferrous Solutions Business Area until 2013, before becoming the President of Americas region.

"Jari Rosendal has an impressive record with a vast international experience of leading businesses in global markets. He is an inspiring leader known for his strong customer orientation and commercial focus. Jari is an excellent choice for Kemira to continue the successful implementation of the ongoing change initiatives and strategy", says Jukka Viinanen, Kemira's Chairman of the Board.

Kemira's current President and CEO, Wolfgang Büchele will assume the position as President and CEO of Linde AG. As communicated earlier, Büchele will continue as Kemira's President and CEO until April 30, 2014.

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kem zelKemira signed an agreement today to sell its formic acid business, including the feed and the airport runway deicing product lines, to Taminco (Allentown, Pennsylvania, USA). The businesses sold had combined revenue of approximately EUR 140 million in 2012. The transaction includes a manufacturing asset for formic acid in Oulu, Finland and approximately 160 employees will transfer to Taminco. The transaction is subject to the fulfillment of customary closing conditions, and the closing is expected during the first quarter in 2014.

The agreed transaction price is EUR 140 million and will be paid fully at closing. Kemira expects to report a capital gain related to the transaction in the first quarter of 2014.

Sodium percarbonate, the remaining business within the ChemSolutions segment, will stay within Kemira and will be reported as part of the Paper segment. After the transaction has closed, the ChemSolutions segment will be discontinued.

- ChemSolutions is a well performing and solid business - however, with no synergies to Kemira's water related core businesses. After the divestment of the formic acid business, Kemira will become a purely water-focused chemical company based on three segments: Paper, Oil & Mining, and Municipal & Industrial. After the successful execution of several non-core divestments in 2013, Kemira's management resources and financing capabilities will be fully focused on growth and profitability improvement in the core businesses, said Wolfgang Büchele, Kemira's President and CEO.

- As a leading specialty chemical producer, Taminco is excited to advance its long term, ongoing strategy of expansion into key markets through the addition of high quality, niche businesses.  Our entry into the formic acid space is an opportunity to leverage our existing skill-set to expand into attractive new product lines, as well as achieve numerous synergies that will continue to optimize value for all of our stakeholders, said Laurent Lenoir, Taminco's Chief Executive Officer.  We are pleased to welcome a great team of ChemSolutions employees to Taminco, and look forward to grow together Taminco's global leadership position in specialty chemicals.

Published in North American News

kem zelKemira has signed an agreement to sell its distribution of hydrochloric acid, sulfuric acid and sodium hydroxide (caustic soda) in Denmark to Brenntag Group. The deal includes the distribution business and certain assets in Copenhagen. The distribution business is currently part of Kemira's Municipal & Industrial segment. Revenue of the divested business in 2012 was approximately EUR 15 million and the transaction is expected to be completed during the first quarter of 2014.

"The divestment of our distribution business in Denmark is well in line with Kemira's sharpened strategy presented earlier this year. The divested business is not a focus area for Municipal & Industrial segment and the transaction will have a positive impact to the segment's EBIT margin. With Brenntag as our partner, Denmark will remain an important market for our water treatment solutions" said Frank Wegener, President of Kemira's Municipal & Industrial segment.

Torsten Walz, Managing Director Brenntag Denmark, says: "Through this acquisition we strengthen and expand our industrial chemicals product portfolio. Our customers will benefit from the extended product portfolio, further investment in our infrastructure and new, long-term strategic supplier relationships."

The transaction does not have material impact on Kemira's financial figures and the parties have agreed not to disclose further financial information.

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kem zelKemira and Bauminas have signed a contract according to which Kemira sells its Brazilian iron and aluminium coagulant business to Bauminas. The deal includes coagulant business related assets, liabilities and personnel of Kemira WaterSolutions Brazil Ltda and shares of Nheel Quimica Ltda as well as its three coagulants manufacturing sites in Brazil (Rio Claro, Araporti and Lages).

The sold businesses have combined reported revenue of approximately EUR 50 million, mainly in Kemira's Municipal & Industrial segment. 193 employees will be transferred to Bauminas as part of the transaction. The transaction is subject to fulfillment of certain conditions and the closing is still expected during the fourth quarter of 2013.

The parties have agreed not to disclose the transaction price. The transaction proceeds are expected to have a positive impact on Kemira's cash flow at closing. Kemira will undertake a non-recurring write-down related to the transaction of approximately EUR 40 million, impacting Kemira's reported EBIT in the fourth quarter of 2013.

"The divestment of our coagulant business in Brazil is well in line with our focus on profitability improvement and cash flow maximization in the Municipal & Industrial segment. Kemira's strategy continues to be focused on those businesses and geographies, where we can achieve a sustainable competitive market position in combination with growth. Exiting the coagulants business in Brazil will further improve the EBIT margin in the Municipal & Industrial segment and will have a positive cash flow impact as well. Brazil will remain an important market for Kemira, especially for the chemicals used in the pulp and paper industry" said Wolfgang Büchele, Kemira's President and CEO.

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kem zelKemira and Stora Enso have today announced the launch of a joint project to promote responsible water management and community engagement in Guangxi Province in Southern China. Water is a crucial resource for sustainable plantation forestry in Guangxi, where Stora Enso leases 90 000 hectares of land and manages eucalyptus tree plantations. The new project aims to find new solutions for responsible water management through stakeholder surveys, community work and water-related capacity building.

The project brings together Kemira's world class know-how on water quality and quantity management, Stora Enso's expertise on tree plantation management, and local communities' practical knowledge and experiences related to water issues in Guangxi. The project will enhance local competence in water management and increase awareness of water issues among industries and communities in the Beihai region of Guangxi Province.

The project will create shared value by improving Stora Enso's tree plantations operations, and by strengthening Kemira's role as the water management solutions provider for the paper industry and for local communities, as well as bringing new know-how and better water management tools to local communities.

stora new1During the project, Kemira and Stora Enso will carry out a detailed study of water resources in the area around Stora Enso's operations in Guangxi. Challenges will be mapped out, and local concerns such as the impacts of tree plantations on water quality and groundwater levels will be duly addressed.

Based on the results of the study, Kemira and Stora Enso will work together with local villagers to provide training on water issues and to examine possible employment opportunities related to water management. Pilot water management projects will be designed together with village representatives, and a water saving program will be launched for the Beihai area together with local partners and stakeholders. The project will start in December 2013 and last until the end of 2015. The details of project implementation and scheduling will be finalised together with the local communities.

"This is a unique project for Guangxi and also globally, and we are extremely proud to be involved," says Stora Enso's CEO Jouko Karvinen. "We will be bringing together the competences of two leading companies and the knowledge of the local community to create the best possible water solutions. As a signatory of the United Nations' Global Compact's CEO Water Mandate, water is a top priority for us wherever we operate. But this project is not just about the environment. Our investments in Guangxi aim to produce renewable packaging products for Chinese consumers but we also want to create value for all our stakeholders in Guangxi. Our ultimate aim is to help create a world class forest technology cluster in the area. This project represents a significant step along that road."

"For Kemira, this will be a major project in the field of corporate responsibility for the coming years. We are dedicated to creating value through our expertise in chemistry and water efficiency both for Stora Enso, one of our key customers, and for the local communities in Guangxi. We will collaborate to develop new solutions for managing water resources more efficiently and initiate activities to increase the awareness of water issues in the Beihai region. China is today the biggest paper and board producing country in the world. To grow sustainably, it is important to develop paper and board production which is strategically backward integrated into the pulp and plantation industries. We are committed to develop new solutions for these processes and to grow together with our customers in this important market," says Kemira's CEO Wolfgang Büchele.

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kem zelKemira will implement a price increase up to 15 %, depending on product segment, for its Pulp and Paper Chemicals. The adjustment will affect selected product lines between 5-15% and will be immediately implemented or as existing contracts allow.

The price increase is an effect of increases in all major cost drivers; including key feed stocks and raw material, energy and transport.  Kemira has continuously rationalized operations and reduced fixed costs, but has now reached a point when a price increase is necessary to secure the position as a strong supplier to the Pulp & Paper Industry.

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kem zelKemira Oyj and Wilmar International Limited have, through their subsidiaries, signed a joint venture (JV) agreement for the manufacture of AKD wax in China in two joint ventures. The JV entities in China will be owned 50-50 and will integrate the current facilities of Kemira in Yanzhou and the relevant Wilmar facilities in Lianyungang. Teaming up of the two major players underlines the long-term interest and determination of both companies to better serve all paper customers globally. The transaction is subject to fulfillment of certain conditions including merger clearances. Closing of the transaction is currently expected to take place in the third quarter of 2014.

Kemira is a global, leading manufacturer of alkyl ketene dimer (AKD). AKD is a sizing agent, which impacts paper and board hydrophobicity and / or water resistance. Sufficient hydrophobicity is important for packaging materials and it improves paper and board runnability in a coating process at the same time. Water resistance also improves printability and dimension stability of the final product during the converting process.
 
"Kemira is the leading producer of synthetic sizes for the paper and packaging board industry. The JV with Wilmar is an important step in the implementation of Kemira's paper strategy" said Petri Helsky, President of Kemira's Paper segment. "Through the JV, we will strengthen our position in the sizing market in Asia Pacific and, at the same time, demonstrate our strategic commitment to the paper industry. The JV will also secure the supply of key raw materials needed in the manufacturing process in China due to the backwards integration into the fatty acid chlorination technology", said Joe Chan, President, APAC region.

Wilmar is a global leading producer of stearic acid, which is the key raw material for AKD production. "The JV, which will be an expansion down the oleochemicals value chain for Wilmar, will capitalize on Wilmar's advantage in sourcing of raw materials as well as on cost efficiencies from its integrated manufacturing operations. The JV will also enhance Wilmar's footprint in the Asia Pacific region", said Dave Cui Xinyu, Head of Wilmar Oleochemicals, China.

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kem zelKemira for the first time has achieved a top position in CDP's Nordic 260 Climate Disclosure Leadership Index (CDLI).  Kemira achieved an excellent score of 96 out of 100 in the index which measures the disclosure of information regarding climate change. The result was announced on October 7 in the CDP Nordic 260 Climate Change Report 2013, which tracks how the Nordic listed companies are acting in response to a changing climate. The CDLI comprises the organizations that achieved a score within the top 10% of the sample assessed. In 2013 the Nordic 260 CDLI comprises 27 companies.

Riikka Timonen, Director, Corporate Responsibility comments: "Energy efficiency in our own operations as well as in and with the products and solutions we bring to the markets is a key for Kemira. For several years, we have carried out systematic improvements in our own energy efficiency, and our innovations are driven by the need to produce more with less. We are committed to innovate together with our customers for sustainable solutions where water meets chemistry to enable our customers to improve their water, energy and raw material efficiency."

The Nordic 260 report including names of companies featured in the CDLI can be found at www.cdp.net. CDP provides the world's only global environmental disclosure system. CDP represents 722 institutional investors with USD 87 trillion in assets under management.

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