Kemira progressing our strategy for profitable growth

Transcription

1 September 21, 2017 Capital Markets Day Kemira progressing our strategy for profitable growth

2 Kemira Capital Markets Day 2017 Program (UK time): Registration & breakfast President & CEO: Jari Rosendal Pulp & Paper: Kim Poulsen Industry & Water: Antti Salminen Lunch Oil & Gas: Pedro Materan Sourcing: Thierry Blomet CFO: Petri Castrén Coffee break Breakout sessions with the management (three groups) Cocktails End Jari Rosendal President and CEO Kim Poulsen President, Pulp & Paper Thierry Blomet SVP, Sourcing Petri Castrén CFO Antti Salminen President, Industry & Water Pedro Materan SVP, Oil & Gas Capital Markets Day September 21,

3 Today s speakers Jari Rosendal President and CEO with Kemira since 2014 Petri Castrén CFO with Kemira since 2013 Key prior positions: Outotec Member of the Executive Board Executive Vice President, President of Americas Region President, Non ferrous Solutions Business Area President, Minerals Processing Division Relevant positions of trust: Chemical Industry Federation of Finland Member of the Board of Directors European Chemical Industry Council (CEFIC) Member of the Board of Directors Key prior positions: Nokia Siemens Networks Head of Corporate Finance (Group Treasurer) Head of Corporate Development Nokia Corporation Head of Mergers & Acquisitions Various finance and business development management roles Capital Markets Day September 21,

4 Today s speakers Kim Poulsen President, Segment Pulp & Paper with Kemira since 2015 Antti Salminen President, Segment Industry & Water with Kemira since 2011 Key prior positions: UPM-Kymmene Paper Asia, EVP and Group Executive Team Member Head of APAC, EVP and Group Executive Team Member Senior Vice President, Plywood business Vitalis Gladius Owner and Senior Partner Paloheimo Group and Fenestra President and CEO Finnforest Several management roles Key prior positions: Kemira Executive Vice President, Supply Chain Management KONE Director, New Equipment Business, Asia Pacific Vice President, Delivery Process Capgemini Finland Managing Consultant Capital Markets Day September 21,

5 Today s speakers Key prior positions: Kemira Pedro Materan SVP, Global Oil & Gas, Industry & Water with Kemira since 2006 SVP, RBU Oil & Mining, Americas Global Business Development and Global Sales Manager, Oil and Gas Cytec Industries Global Marketing Manager for Oilfield Sales Manager, Americas for Phosphine Chemicals (Oil, Mining and Textiles) Regional Technical Sales Manager for Water Treatment Sales Rep for Water Soluble Polymers Key prior positions: PPG Thierry Blomet SVP, Sourcing with Kemira since 2013 Director, Raw Material Purchasing EMEA Director, Indirect Purchasing EMEA Business Director Industrial Finishes Europe Dupont Business Director Coatings for mass production industry Capital Markets Day September 21,

6 Jari Rosendal, President and CEO September 21, 2017 Capital Markets Day Kemira progressing our strategy for profitable growth

7 Kemira in brief FY2016: Revenue EUR 2,363 billion, Operative EBITDA EUR million, margin 12.8% SEGMENT SPLIT 38% Industry & Water #1 in water treatment in NA and Europe #1 in shale in NA 62% Pulp & Paper #1 globally GEOGRAPHIES 38% AMERICAS 1.USA 2.Canada 3.Brazil 10% APAC 1.China 2.Indonesia 3.South Korea 52% EUROPE 1.Finland 2.Sweden 3.Germany PRODUCTS 20% Other: e.g. defoamers, dispersants, and biocides 15% Sizing and strength 25% Bleaching and pulping 20% Polymers 20% Coagulants Revenue by product category rounded to the nearest 5% CUSTOMERS 8,000 Sold-to customers 16,000 Ship-to customers Examples of largest customers Municipalities, e.g. Frankfurt London New York City Paris Shanghai Singapore Capital Markets Day September 21,

8 Our targets and actions for profitable growth ORGANIC GROWTH Investments in capacity expansion Seize opportunities in growth pockets Shale oil & gas business CEOR and oil sands Digitalization APAC R&D, new products OPERATING COST DISCIPLINE Prudent cost culture Above-the-market growth and operative EBITDA of 14-16% ACQUISITIONS Very selective approach Strategic and synergistic fit Accretive to profitability Reasonable valuation EFFICIENCY Manufacturing footprint and utilization optimization BOOST Operational excellence Organizational efficiencies with new structure Complexity reduction Efficient processes Capital Markets Day September 21,

9 Progress in profitable growth Opening / expansion of site 11.3% 2013 operative EBITDA Opening of Nanjing (CN) site Q1 14 Q2 14 Opening of EMEA service center Acquisition BASF AKD emulsion business Acquisition AkzoNobel s paper chemicals Opening of Tarragona acquisition coagulant site (ES) Q % 2016 operative EBITDA Q4 14 Q1 15 Expansion of dry and emulsion polyacrylamide (US) Acquisition of Soto Industries (US) Q2 15 Operational efficiencies Q3 15 Expansion of pulp chemicals, Oulu (FI) Closure of Longview (US) Start-up of Ortigueira (BR) sodium chlorate site and announcement of Joutseno (FI) expansion Q4 15 Q1 16 Acquisition of Polymer Services (US) Closure of Soave (IT) Closure of site Q2 16 Q3 16 Bradford (UK) expansion San Giorgio (IT) expansion Closures of Ottawa (CA) and Zaramillo (ES) Botlek (NL) modernization Transportation agreement with Odyssey BOOST operational excellence program launch Q4 16 Q1 17 Odyssey go-live in North America Two segment structure operational Start-up of Joutseno (FI) chlorate expansion Q2 17 Q3 17 Capital Markets Day September 21,

10 Kemira has managed to improve EBITDA even with the downturn in the O&G market Revenue EUR million Operative EBITDA and operative EBITDA margin EUR million % 11.3% 11.8% 12.1% 12.3% LTM LTM Between , Oil & Mining revenue and operative EBITDA dropped EUR 70 million and EUR 30 million respectively LTM = Last Twelve Months ending June 2017 Capital Markets Day September 21,

11 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: E-commerce drives the need for packaging material Growing middle class, increased standards of living and urbanization leads to higher usage of water, energy, tissue, and board Recycling and use of renewables leads to e.g. higher usage of strength chemicals Regulation increases water treatment Scarcity of resources accelerates need to produce more with less Challenges Relevant target market (EUR billion) Americas EMEA Risks to global GDP growth APAC Decline in demand for printing and writing paper demand ~20 +3% Management estimation based on various sources ~23 2-3% 2-3% 3-4% CAGR Capital Markets Day September 21,

12 APAC is driving future market growth APAC market is the largest and fastest growing market Our business in APAC has been growing and EBITDA turned to positive after 2014 New greenfield manufacturing site in Nanjing, China in 2014 and acquisition of AkzoNobel s paper chemicals in 2015 have helped to improve profitability We are market leader in Pulp & Paper with ~10% market share Industry & Water continue to grow, albeit from small base Revenue H1 2017* Operative EBITDA H1 2017* * H annualized Capital Markets Day September 21,

13 Innovation drives growth EUR 220 million revenue from recent innovations We innovate for the future through customer collaboration, partnerships and open innovation. We use digitalization to improve our own performance as well as the services offered to customers. 250 R&D experts create new innovations in R&D centers in Finland, China and US. 348 patent families Over 1,200 patents 20% Other: e.g. defoamers, dispersants, and biocides 15% Sizing and strength Products EUR 2.4bn 25% Bleaching and pulping 20% Polymers 20% Coagulants

14 Innovation sales on track pipeline strong Sales from new products (launched within the last 5 years) % 8% 8% 7% 5% of Group s revenue from new products Best selling new products in Oil & Gas Freeze tolerant friction reducer 2. Oil & Gas Stabilizing additives for CEOR polymers 3. Pulp & Paper Strength for tissue Capital Markets Day September 21,

15 BOOST update - targeting EUR million of savings and EUR 50 million of inventory reduction 13,000 suppliers 200 warehouse locations 16,000 ship-tocustomers BOOST is about improving competitiveness through efficiency Majority of savings will result from logistics Customer Service Distribution center Kem Connect Kemira spends annually around EUR 170 million on road transportation Supplier Kemira Customer Sourcing of logistics by Odyssey expected to yield significant savings of road transportation cost 63 manufacturing sites 2,300 products 250,000 orders per year Odyssey roll-out done in North America in April and Europe to follow

16 Our key actions to improve margins Operative EBITDA margin 14-16% 12.1% 12.8% 12.3% AkzoNobel s paper chemicals business Efficiencies from new two segment structure New bleaching chemical capacity (Joutseno, Finland) Oil sands Optimization of operations: majority of savings in logistics Chemical Enhanced Oil Recovery Advanced Water Treatment Market and raw material related volatility LTM Acquisition synergies Group Pulp & Paper BOOST - Industry & Industry & operational excellence Water Water Industry & Water Volatility Mid- to long-term target Estimated end of 2017 run-rate 100% 100% 75% Low 25% Low Low Full run-rate by EO 2017 EO yrs 2-3 yrs 2-5 yrs 3-5 yrs LTM = Last Twelve Months ending June 2017 Capital Markets Day September 21,

17 Hurricanes Harvey and Irma impacting chemical industry Our first priority is safety of employees and we are happy to report that everyone is safe Multiple oil refineries and chemical providers impacted short-term by consequences of flooding Only limited short-term direct impact on Kemira Our assets were not damaged Customer operations not materially impacted Indirect impact also limited full recovery depends on normalization of supply chain Availability of raw materials partially limited Disruptions in logistics Capital Markets Day September 21,

18 Selective acquisitions possible if strategic fit and financials reasonable Primary business / company (primary region) Board and paper chemicals / Soto (Canada) Q3/2013 Polymer manufacturer / 3F (global) Q4/2013 Board and paper chemicals / BASF AKD (Europe) Q2/2014 Board and paper chemicals / Akzo Nobel (global) Q2/2015 Board and paper chemicals / Soto (US) Q3/2015 Oil field services / Polymer Services (US) Q4/2015 Acquisition criteria Must improve operative EBITDA margin in second full year after closing Must be synergistic and strengthen market position and/or our competencies Capital Markets Day September 21,

19 Balanced cash flow and capex Investments done in profitability enhancing growth areas New chlorate plant in Brazil 2016 New chlorate line in Finland in 2017 Capacity additions related to AkzoNobel acquisition Polymer capacity additions Balanced cash flow and capex Good maintenance capex control Prudent strategic prioritization of investments Optional investments / M&A in profitable growth areas Net working capital optimization Capital Markets Day September 21,

20 Progressing our strategy for profitable growth Balanced cash flow and capex Increase efficiency Grow by investing, innovating and capturing market opportunities GROUP S MID- TO LONG-TERM TARGETS Above-the-market growth Operative EBITDA 14-16% Gearing below 60% Dividend policy: stable and competitive dividend

21 Kim Poulsen, President, Pulp & Paper September 21, 2017 Capital Markets Day Pulp & Paper driving growth as market leader

22 Pulp & Paper market leader with solid track record REVENUE AND OPERATIVE EBITDA MARKET ENVIRONMENT Kemira (pulp and paper) #1 BASF (paper) #2 Solenis (paper) #3 AkzoNobel (pulp) #4 Ecolab (paper) #5 REVENUE BY CUSTOMER TYPE AND MARKET GROWTH 40% Pulp Market growth REVENUE BY GEOGRAPHIES AND MARKET GROWTH BY REGION 35% Americas Market growth 1-2% 0-1% 40% Board & tissue 50% EMEA 20% Printing & writing papers 2-3% 0-1% -1-2% 15% APAC 2-3% REVENUE BY PRODUCT CATEGORY 10% Polymers 10% Other 20% Defoamers, dispersants, biocides and other process chemicals CUSTOMER EXAMPLES 35% Bleaching & pulping 25% Sizing & strength Note: Revenue by industry, product and geography rounded to the nearest 5% Capital Markets Day September 21,

23 Customer interview with UPM 2016 CMD UPM was one of our TOP 5 clients Jyrki Ovaska EVP, Technology at UPM interviewed by video Mr. Ovaska s feedback about UPM s business relationship with Kemira Kemira s international footprint matches UPM s locations Comprehensive product portfolio is attractive Further potential for Kemira to increase share of UPM s business Request for more collaboration to find new innovations and efficiencies 2017 CMD UPM is now one of our TOP 3 clients Mr. Ovaska s feedback regarding change from 2016 to 2017 visible on video Capital Markets Day September 21,

24 Our winning formula to continue growth Invest in growth and R&D Capacity additions 9 new products in 2016 Improve customer experience TOP 50 customers are EUR 1bn Customer satisfaction to 98% Enhance performance culture New mgmt. structure Employee engagement 15/16 survey items improved since 2015 Reduce complexity Group: 240 products out Target to reduce by 200 in 2017 Above-the-market growth and operative EBITDA 14-16% Maximize capacity utilization Bleaching ran flat out 9 years Paper chemicals varying Manage fixed costs H business overheads below 2016 level Capital Markets Day September 21,

25 Board and paper production shifting to emerging markets TOTAL BOARD & PAPER PRODUCTION: 2015: 402 million tons 2030: 461 million tons CAGR%: around 1 % / annum North America 2015: 82 mt 2030: 75 mt Latin America 2015: 21 mt 2030: 31 mt W. Europe 2015: 85 mt 2030: 78 mt Africa 2015: 4 mt 2030: 6 mt E. Europe 2015: 18 mt 2030: 26 mt China 2015: 106 mt 2030: 139 mt Oceania 2015: 4 mt 2030: 4 mt Japan 2015: 26 mt 2030: 21 mt Rest of Asia 2015: 55 mt 2030: 82 mt Growth of board and paper production by region mt growth in APAC by 2030 BIGGEST PRODUCERS ARE: China, USA, Japan, Germany, India, Sweden, Korea, Canada, Finland, Brazil BIGGEST GROWTH AREAS ARE: China, India, Indonesia, Brazil, Russia, Vietnam Source: Pöyry

26 Strong market positions and strategic investments REGION MARKET POSITION GROWTH TREND GROWTH STRATEGY EMEA #1 Exceptional customer experience North America #2/3 Transformation from paper to board APAC South America TCM = Total Chemistry Management #1 #3 Continue to grow with major players (TCM) and assess future investments Assess future bleaching investments

27 Market position strengthened through successful acquisition AkzoNobel s paper chemicals acquired in May 2015 Target initially EUR 15 million Run-rate ahead of plan, close to EUR 20 million Yanzhou China Nanjing China Gunsan Korea Acquired site Kemira site Acquisition strengthened our position especially in APAC Wellgrow Thailand 4 of 6 sites acquired were in APAC APAC capacity addition in Nanjing, China executed well and ramping up according to plan Pasuruan Indonesia Hallam Australia Capital Markets Day September 21,

28 We have become market leader in APAC Board and paper production in APAC will be bigger than Europe and North America combined by 2020 >90% of global board and paper production growth in APAC Kemira now #1 with close to 10% share in APAC Revenue doubled to around EUR 200 million in 3 years Fragmented market provides good potential for profitable growth Pulp & Paper relevant chemicals market 2017 EUR million EMEA North America APAC South America Continue to grow revenue and market share CAGR % -1-0% 2-3% 2-3% Source: Pöyry, management estimation Capital Markets Day September 21,

29 Strong demand in pulp market creating growth opportunities New pulp mill projects are driven by increasing demand for board and tissue Food and liquid packaging board is growing particularly fast in Asia Pulp is produced close to wood sources and then shipped to board, paper, and tissue mills Growth in board = 1 new pulp mill per year Multiple pulp mill projects realised and expected in Northern Europe creating opportunities for Kemira to grow with the market In addition, a few large scale pulp mill projects expected in South America Confirmed new capacity / debottlenecking Possible new mills Capital Markets Day September 21,

30 Successful value creating investments case Joutseno Kemira bleaching chemicals revenue growth Kemira s capacity in sodium chlorate was fully utilized, hence the need for additional capacity Capacity doubled in Joutseno with around EUR 50 million investment Investment realized according to budget and start-up was ahead of schedule in early September 2017 Targeting maximum capacity utilization by H Part of the production will be shipped to APAC to support the growth in the region +10% +5% +3% +7% CAGR +6% H1 ann. Capital Markets Day September 21,

31 Antti Salminen, President, Industry & Water September 21, 2017 Capital Markets Day Industry & Water stronger platform for profitable growth

32 Industry & Water stronger platform for profitable growth Profitable and stable underlying business New structure creates growth and efficiency opportunities Innovation supporting growth in selected areas

33 Industry & Water strong positions in chosen categories MARKET POSITION Market share in water treatment in Europe and North America Market share in polymers used for friction reduction in US shale fracking REVENUE AND ORGANIC GROWTH (Y-O-Y) EUR million % >30% -7% -5% -5% 0% +6% +9% 248 Q1 Q2 Q3 Q4 Q1 Q REVENUE BY APPLICATION TYPE AND MARKET GROWTH 70% Water treatment Market growth 2-3% 5-6% 2-3% REVENUE BY GEOGRAPHIES AND MARKET GROWTH BY REGION 40% Americas Market growth 3-4% 55% EMEA 15% Oil & Gas 3-4% 15% Other 5% APAC 5-6% REVENUE BY PRODUCT CATEGORY 20% Other products such as defoamers and biocides 35% Polymers CUSTOMER EXAMPLES Municipal (40%), customer examples Amsterdam Barcelona Frankfurt London Oslo Paris Stockholm Los Angeles Montreal New York City Toronto Melbourne Shanghai Singapore 45% Coagulants Industrial (60%), customer examples Note: Revenue by industry, product and geography rounded to the nearest 5% Capital Markets Day September 21,

34 Returning to growth in 2017 REVENUE EUR million % H H OPERATIVE EBITDA AND OPERATIVE EBITDA MARGIN EUR million % 11.8% 12.2% 10.8% H H In 2016, financials impacted by market turmoil in shale industry H1/17 revenue growth looks promising Growth +9%, driven by Oil & Gas Volume growth in water treatment +2% Profitability was impacted by higher raw material prices Profitable growth opportunities: Selected applications within Oil & Gas, such as CEOR and oil sands, as well as shale fracking Advanced Water Treatment (AWT) Water treatment in APAC Capital Markets Day September 21,

35 New structure creates growth and efficiency opportunities Leveraging the full potential of new combined segment Full geographical reach in all regions Global polymer expert network Water treatment expertise for O&G and Mining Structural change means faster decision making More efficient development and roll-out of new innovations Important part of segment s profitability improvement On Group-level cost savings EUR million Municipal & Industrial 15% Other applications 15% Oil & Gas Industry & Water Oil & Mining 70% Water treatment Capital Markets Day September 21,

36 Profitable growth opportunities ahead... H showed good volume growth +2% in water treatment Around +50% in Oil & Gas Multiple initiatives ongoing to boost growth in both businesses BUSINESS AREA REGION GROWTH INITIATIVES IN WATER TREATMENT EMEA NA APAC Desalination BioGas Sludge dewatering Middle East and Africa Odor control OIL & GAS GLOBAL CEOR Sludge dewatering Deep sludge dewatering Oil sands in Canada REVENUE IN GROWTH INITIATIVES EUR million % Water Treatment Oil & Gas Capital Markets Day September 21,

37 fueled by strong innovation pipeline EUR 110 million, 12% of Industry & Water revenue from innovation in 2016 Projects under evaluation Projects under development and early commercialization # of projects Projected 10-yr NPV Enhanced Oil Recovery 8 Oil sands 2 >20 Continuous ideas inflow Shale oil & gas 3 EUR 650 million Solid liquid separation (incl. AWT) Sludge dewatering, nutrients recovery, mining processes 12 Desalination, re-use & disinfection (incl. AWT) 1 AWT = Advanced Water Treatment Capital Markets Day September 21,

38 ADVANCED WATER TREATMENT CASE EXAMPLE Innovation case KemConnect Smart Dewatering The next generation of sludge treatment will focus on customer performance and value created KemConnect Smart Dewatering combines a complete chemicals portfolio, continuous chemistry optimization and real-time monitoring to a new business model Chemical Cost Disposal Cost Customer Net Savings KemConnect Service Fee Disposal Cost Dewatering Today Smart Dewatering Tomorrow

39 Stronger platform for profitable growth Strengthened business in growing market New structure enables greater agility and higher profitability Profitable growth opportunities driven by innovation Oil & Gas returned to growth

40 Pedro Materan, SVP, Oil & Gas September 21, 2017 Capital Markets Day Oil & Gas well positioned for growth in niche areas

41 Oil & Gas small and focused team Designed to extract more DESIGNED TO EXTRACT MORE A unique combination of innovative chemicals and application knowledge that improves process efficiency and yield in oil & gas applications 152 Revenue in EUR million (LTM) 75% Revenue in Americas 200 Customers 85% of business in polymers 30 Global commercial team 90% On upstream and in water related applications LTM = Last Twelve Months ending June 2017 Capital Markets Day September 21,

42 Resilient business set for growth KEMIRA OIL & GAS REVENUE LTM 25% Other 25% Oil sands and Chemical Enhanced Oil Recovery Revenue EUR 152 m (LTM) LTM = Last Twelve Months ending June 2017 Oil price +47% in H1/17 50% Shale fracking Figures rounded to closest 5% Growing market demand with our selective market diversification assuring growth Kemira s offering Process efficiencies: polymers that reduce energy consumption by 60% in shale oil fields Cost reduction: higher concentrated liquids that make offshore oil recovery more cost effective (CEOR) Addressing environmental regulations: tailing treatment in oil sands New innovative technologies driving expansion Capital Markets Day September 21,

43 Well positioned and growing into adjacent areas New global organization concentrating on extraction areas Area Oilfield Chemicals Oilfield Services MARKET POTENTIAL (AVAILABLE) Around 1.5bn Around 1bn APPLICATIONS Drilling Cementing Shale Oil sands Production CEOR Upstream Reaching Midstream Producing Downstream Transporting Downstream Processing CUSTOMERS Service companies Operators Oil & Gas revenue VALUE PROPOSITION Manufacturing + Innovation Solutions 90% 90% 10% GROWTH (KEMIRA S) Moderate Strong Capital Markets Day September 21,

44 Our innovations make shale industry more efficient Shale Market Polymer market size +200M EUR and growing at double digit today Polymer more favorable product based on cost/performance KEMIRA Provides unique chemistries, friction reducers, that reduce energy needed during hydraulic fracturing Volume growth over 100% in H Differentiating from competitors with innovative products #1 market position with over 30% market share Competitor C Competitor B Others Market shares in polymers used for fracking KEMIRA Competitor A Capital Markets Day September 21,

45 Long-term growth potential in CEOR Chemical Enhanced Oil Recovery market CEOR market size EUR 1bn of which EUR 500 million accessible to Kemira Market growth estimated to be 5% driven by decline of production from existing fields KEMIRA Kemira s MaxXtract solution tailored specifically to customer needs, incorporating chemistry, equipment and services Kemira s knowhow in polymers helps oil producers Potential for > EUR 100 million revenue in 5 years Substantial long-term growth potential within existing CEOR projects and through new projects Capital Markets Day September 21,

46 Oil sands has grown from 0 to above EUR 20m in 2 years Oil sands market Market size is around EUR 400 million Projects are capex-heavy but developed projects are considered as sunken costs KEMIRA Offers total solutions to reduce environmental concerns Customer base expanding Revenue has grown to above EUR 20 million in 2 years Target to more than double current revenues in 2-3 years Companies operating in oil sands market (examples) Capital Markets Day September 21,

47 Building on current performance for future growth OIL & GAS REVENUE GROWTH EUR million % 83 H H Strategic priorities Strengthen position and keep growth momentum Increase margins Hire and develop our people Innovate for further growth Introduction of new products Field trials in new key applications 75% Americas 25% EMEA Capital Markets Day September 21,

48 Oil & Gas well positioned for growth in niche areas 2009 Phase I 2017 Phase II 2022 Phase III New business EUR 30 million Niche position in niche market Oil & Mining Diversification EUR 152 million (LTM) Growing in shale, oil sands and CEOR Industry & Water: Global Oil and Gas Bigger and better Strong player in three core areas (shale, oil sands, CEOR), including service capabilities LTM = Last Twelve Months ending June 2017 Capital Markets Day September 21,

49 Thierry Blomet, SVP, Sourcing September 21, 2017 Capital Markets Day Sourcing contributing to profitability improvement

50 Strategic sourcing improves cost competitiveness, service performance, and reduces risk VARIABLE COST SPLIT 2016 EUR 1.3 billion 20% Logistics 15% Electricity & energy 65% Raw materials EXPOSURE TO OIL RELATED RAW MATERIALS 70% Not oil related 30% Oil related TOP 10 RAW MATERIALS BY SPEND 1. Sodium hydroxide 2. Acrylonitrile (OR) 3. Colloidal silica dispersion 4. Fatty acid 5. Aluminium hydrate 6. Amines (OR) 7. Alpha olefin (OR) 8. Acrylic ester (acrylic acid and methyl acrylate) (OR) 9. Petroleum solvents (OR) 10.Sodium chloride Top 10 account for almost 50% of Kemira s raw material spend Capital Markets Day September 21,

51 Sourcing continues to improve Kemira s performance Single source dependency % of total raw material spend 35 Payment term Days Improved by 15 days Improved over 20ppt REDUCE RISK IMPROVE WORKING CAPITAL Capital Markets Day September 21,

52 Sourcing helps business to improve profitability in changing markets Raw material availability Price dynamics Capital Markets Day September 21,

53 Supply / demand impacted by investments, end-markets and disruptions Long cycles of oversupply or tightness driven by producers investments and industry demand Supply disruptions are typical in chemical industry Our solution: 1. Contracted supply vs. spot is critical 2. Timing, and length of contracts are key to competitiveness 3. Multiple sources required Capital Markets Day September 21,

54 Feedstock and raw material price dynamics Change (y-o-y) in key feedstock and raw material prices in the US 90% 70% 50% 30% 10% -10% -30% -50% Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 WTI Crude Oil Jet Kero 55 US Propylene Acrylonitrile US Ethylene Acrylic Acid WTI +68% Propylene +33% Acrylonitrile +18% Key feedstock Key oil related raw materials Around 30% of raw material spend is connected to volatile vertically integrated petrochemical value chain Most feedstock are globally traded commodities significantly influenced by FX and cross-region trading arbitrage Our solution: 1. Value-chain cost modeling 2. Agile price management Capital Markets Day September 21,

55 Better sourcing, through strategic management of over EUR 1bn spend, is contributing to profitability improvement Actions Reduce single source dependency Targets Single source exposure < 5% of total raw material spend Increase preferred vendors spend Preferred vendors share > 65% of total indirect spend Drive supplier relationship strategically Supplier initiatives > EUR 5 million savings Digitalize and automate to increase efficiency Sourcing fixed cost < 0.3% of Kemira revenue

56 Petri Castrén, CFO September 21, 2017 Capital Markets Day Kemira continues to grow supported by value creating investments

57 Both segments targeting 14-16% operative EBITDA Pulp & Paper has gradually improved its margin towards 14-16% range Raw material price pressure was visible in both segments in H PULP & PAPER 11.5% 11.8% 11.7% 12.1% 13.4% 13.0% Target 14-16% INDUSTRY & WATER 10.4% 10.4% 12.3% 12.2% 11.8% 11.1% Target 14-16% MUNICIPAL & INDUSTRIAL 13.7% 14.9% 12.1% 9.3% 10.4% OIL & MINING LTM Mid-to long-term target LTM = Last Twelve Months ending June * 2013* 2014* 2015* 2016 LTM Mid-to long-term target * Figures are sum of M&I and O&M segments 12.6% 10.5% 12.7% 9.6% 5.9% Capital Markets Day September 21,

58 Raw material costs and sales price correlation Strong correlation between sales prices and variable costs In the history, the lag has been around 2-3 quarters VARIABLE COST VS SALES PRICE TREND Brent oil, USD Sales prices* Variable costs* *) 12-month rolling change vs previous year in EUR million Capital Markets Day September 21,

59 Profitability impacted by net change of sales prices and variable costs In 2016, net change of sales prices and variable costs compared to 2015 was zero In H1 2017, clear headwind Net impact of sales prices and variable costs on EBITDA was around EUR -36 million This is being mitigated by price increases We expect headwind to ease in the coming quarters Sales prices and variable costs on EBITDA level (change y-o-y) Q1 Q2 Q3 Q4 Q1 Q Net impact on EBITDA (sales prices-variable costs) Sales prices Variable costs Capital Markets Day September 21,

60 Investing in value creating growth Recent largest value creating investments New chlorate plant in Brazil and new chlorate line in Finland Capacity additions due to integration of acq. Polymer capacity in Italy and UK CAPEX guidance and return criteria In 2018, depending on timing of opportunities, EUR million Includes capacity expansion in Oil & Gas Thereafter, around 5-6% of revenue Flexibility maintained for selected major expansion projects Expansion projects in strategic investment areas with sufficient financial returns Capital expenditure excluding acquisitions EUR million Expansion Improvement Maintenance Around EUR 200m Capital Markets Day September 21,

61 Debt portfolio is well diversified Net debt / operative EBITDA and Gearing Gross debt maturity profile, end of Q EUR million Net debt Operative EBITDA 532m 249m 456m 486m 642m 634m 252m 253m 287m 303m 690m 298m 758m 297m (r12m) EIB NIB Bilaterals Bonds Undrawn RCF Others % 41% 42% 54% 54% 61% 69% x 1.8x 1.9x 2.2x 2.1x 2.3x 2.6x H H Capital Markets Day September 21,

62 Continue to grow supported by value creating investments 1 Deliver higher profitability Group s mid- and long-term financial targets 2 3 Improve cash flow Efficient capital allocation and returns GROUP Above-the-market growth Operative EBITDA 14-16% Gearing below 60% Dividend policy: stable and competitive dividend

63 CEO s closing remarks What has changed since 2016 CMD Oil & Gas is back on track Sales price decline stopped Organizational structure streamlined leaner and more agile Expansion investments completed BOOST progressed R&D new products launched Group s mid- and long-term financial targets GROUP Above-the-market growth Operative EBITDA 14-16% Gearing below 60% Dividend policy: stable and competitive dividend

64 Appendix

65 Key figures 2017 vs 2016 EUR million Q Q Δ% H H Δ% Revenue , , Operative EBITDA margin 12.5% 13.4% % 13.0% - Operative EBIT margin 7.1% 7.9% - 6.4% 7.5% - Finance costs, net Earnings per share, EUR Cash flow from operations Capex excl. acquisitions Net debt Gearing, % at period-end Inventories Personnel at period-end 4,849 4, ,849 4,873 0 Capital Markets Day September 21,

66 Pulp & Paper EUR million Q Q Δ% H H Δ% Δ% Revenue , , Operative EBITDA margin 13.0% 13.7% % 13.4% % 12.1% - Operative EBIT margin 7.0% 8.0% - 6.7% 7.9% - 7.7% 6.8% - Capital expenditure Cash flow after investing activities Capital Markets Day September 21,

67 Industry & Water EUR million Q Q Δ% H H Δ% * Δ% Revenue Operative EBITDA margin 11.8% 13.1% % 12.2% % 12.2% - Operative EBIT margin 7.2% 7.8% - 6.0% 6.8% - 6.5% 6.9% - Capital expenditure Cash flow after investing activities * Sum of Oil & Mining and Municipal & Industrial segments. Capital Markets Day September 21,

68 Revenue split by country FY 2016 Other EMEA 8% Indonesia 1% China 3% Other APAC 6% USA 27% Norway 2% Netherlands 2% France 2% Italy 2% Russia 2% Spain 2% UK 3% Poland 3% Sweden 6% APAC EMEA AMERICAS Canada 5% Brazil 3% Uruguay 2% Other Americas 1% Germany 6% Finland 14% Capital Markets Day September 21,

69 Revenue and cost distribution per currency Currency exchange rates had around EUR +4 million impact on the operative EBITDA in Q and around +5 million in H Guidance: 10% change in our main foreign currencies would approximately have EUR 10 million impact on operative EBITDA on an annualized basis KEMIRA REVENUE DISTRIBUTION 2016 USD 35% KEMIRA COST DISTRIBUTION 2016 USD 31% EUR 44% CAD 4% BRL 3% CNY 3% EUR 41% SEK 8% CAD 4% CNY 4% Others 11% Others 12% Capital Markets Day September 21,

70 Key figures and ratios 5-year summary EUR million (except ratios) 2012* Revenue 2, , , , ,363.3 Operative EBITDA of which margin 11.1% 11.3% 11.8% 12.1% 12.8% Operative EBIT of which margin 6.9% 7.4% 7.4% 6.9% 7.2% Cash flow from operations Capital expenditure, excluding acq Gearing at period-end 42% 41% 42% 54% 54% Inventories Personnel at period-end 4,857 4,453 4,248 4,685 4,818 * Restated figures reflect the change of IAS 19, Employee Benefits Capital Markets Day September 21,

71 Per share figures 5-year summary Earnings per share, EUR Cash flow from operating activities per share, EUR Equity per share, EUR Dividend per share, EUR Share price, EUR, end of period Market capitalization, EUR million 1,796 1,849 1,504 1,654 1,848 Number of shares, million (excl. treasury shares) P/E ratio P/CF ratio P/B ratio Dividend yield, % Capital Markets Day September 21,

72 Income statement (IFRS) EUR million Revenue 2, ,373.1 Other operating income Operating expenses -2, ,116.4 Depreciations, amortizations and impairments Operating profit Finance costs (net) Share of profit or loss of associates Profit before tax Income taxes Net profit for the period Equity owners of the parent Non-controlling interests Earnings per share for net profit attributabe to the equity owners of the parent company (EUR per share) Capital Markets Day September 21,

73 Balance sheet (IFRS) EUR million Goodwill* Other intangible assets Property, plant and equipment Shares and other investments Inventories* Receivables Cash and cash equivalents Total assets 2,621 2,595 Equity Interest-bearing liabilities Interest-free liabilities Total equity and liabilities 2,621 2,595 * Key audit matter Capital Markets Day September 21,

74 Cash Flow statement (IFRS) EUR million Net profit for the period Total adjustments Change in net working capital Finance expenses Income taxes paid Net cash generated from operating activities Purchases of subsidiaries and business acquisitions Capital expenditure Proceeds from sale of assets 37 3 Change in long-term loan receivables 1 0 Cash flow after investing activities Capital Markets Day September 21,

75 Cash flow profitability improvement is the main driver Cash flow from operations has improved nicely Main driver for cash flow is profitability target of 14-16% operative EBITDA Net Working Capital at good level, around 8% of 2016 revenue BOOST expected to improve inventories, revenue growth impacting NWC to other direction No major change expected in Finance expenses Taxes paid expected to increase Underlying tax rate 22-25% EUR million Operative EBITDA Reported EBITDA Change in NWC Finance expenses Taxes paid Other items 1 2 Cash flow from operations Capital Markets Day September 21,

76 Kemira offers stable and competitive dividends Kemira s dividend policy is to pay a stable and competitive dividend Kemira has paid dividends every year since listing of shares in 1994 Kemira offers attractive dividend yield Average dividend yield in relevant indices EuroStoxx Chemicals 2.3% OMX Helsinki % % 4.5% 4.4% 5.4% 4.9% 4.4% Dividend per share Dividend yield Kemira s dividend yield calculated using the share price at year-end Capital Markets Day September 21,

77 Addressing fixed and variable costs Operating expenses in 2016 EUR 1.9 billion 30% Fixed costs 15% Logistics 10% Electricity and energy 45% Raw materials Kemira is actively reducing its cost base New two segment structure and related reorganization is purely addressing fixed costs Savings target EUR million Run-rate by end of 2017 BOOST program, savings mostly in logistic costs Savings target EUR million Run-rate in 1-2 years In addition, inventory reduction target of EUR 50 million Capital Markets Day September 21,

78 Pulp & Paper Technology and market leader 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 Value chain part covered by Kemira Main competitors: BASF, Akzo Nobel, Solenis, Ecolab, SNF Capital Markets Day September 21,

79 Industry & Water Technology and market leader in water treatment as well as in niche applications in oil & gas RAW MATERIALS INTERMEDIATES PRODUCTS APPLICATIONS SALES CHANNEL CUSTOMERS Acrylonitrile Acrylic acid Sulfuric acid Hydrochloric acid Aluminium hydrate Iron ore Pickling liquor Copperas Various monomers Acrylamide Cationic monomer Polymers (EPAM, DPAM) Al Coagulants Fe Coagulants Dispersants & antiscalants Biocides Emulsifiers Defoamers Formulations Raw water & waste water treatment Sludge treatment Friction reduction Enhanced oil recovery Tailings treatment Mining processes Direct sales Distributor/reseller Service companies Municipalities Private operators Industrial customers Pumpers Oil & Gas operators Service companies Mine operators Value chain part covered by Kemira Main competitors: Coagulants: mainly local small companies, Feralco, USALCO Polymers: SNF, Solvay, Ecolab, Solenis, BASF Capital Markets Day September 21,

80 Kemira largest shareholders and Board of Directors Shareholders on August 31, 2017 Kemira Board of Directors % of shares 1. Oras Invest 18.2% 2. Solidium (owned by State of Finland) 16.7% 3. Varma Mutual Pension Insurance Company 4. Ilmarinen Mutual Pension Insurance Comp. 3.4% 2.3% 5. Kemira Oyj 1.9% Total number of shares 155,342,557 Foreign ownership of shares 24.5% Total number of shareholders 35,595 Kerttu Tuomas Vice Chairman Member since 2010 Jari Paasikivi, Chairman Member since 2012 Oras Invest Oy, CEO Wolfgang Büchele Member in and since 2014 Shirley Cunningham Member since 2017 Kaisa Hietala Member since 2016 Timo Lappalainen Member since 2014 Capital Markets Day September 21,

81 Kemira s Management Board President and CEO Jari Rosendal Pulp & Paper Kim Poulsen Industry & Water Antti Salminen Operational Excellence Esa-Matti Puputti CFO Petri Castrén Human Resources Eeva Salonen CTO Heidi Fagerholm Jukka Hakkila, Chief Legal Officer, acts as secretary of Management Board and Board of Directors Capital Markets Day September 21,

82 Data about shale oil and gas industry US rig count (quarterly avg) and oil price (WTI) Frac stages in North America (source: IHS Markit) 1600 Rig count Oil price Outlook Q1/15 Q3/15 Q1/16 Q3/16 Q1/ Capital Markets Day September 21,

83 CORPORATE RESPONSIBILITY UPDATE 1/2 Targets & Performance: Q2/2017 Focus area Issue, KPI, target value Comments Status Sustainable products & solutions INNOVATION SALES Share of innovation revenue of total revenue, % 10% by the end of 2017 KPI reported quarterly During Q2/2017 several new products or solutions were commercialized and Kemira expects to achieve the 10% target during % 7% 8% 8% 9% 9% Q2 10% Target 2017 Behind target In progress Achieved Responsibility in our supply chain SUPPLIER MANAGEMENT Number of onsite sustainability audits for highest risk suppliers (with lowest sustainability assessment score 1 ) 5 suppliers audited every year during , average KPI reported annually All earlier low-scored suppliers improved their performance in re-assessments, and no new high risk raw material suppliers were detected. However, a few suppliers have refused to take EcoVadis assessments this year due to lack of resources or company policies. Those will be audited in Q3 and Q Q2 Target 2020 Behind target In progress Achieved Responsible manufacturing CLIMATE CHANGE Carbon index Kemira Carbon Index 80 by end of 2020 (2012 = 100) KPI reported annually Sourcing of low carbon energy continued according to plan. As part of the E3 Plus program, four Energy Review site visits were performed during Q The performed energy reviews cover more than 90% of Kemira s total energy consumption Target 2020 Behind target In progress Achieved Capital Markets Day September 21,

84 CORPORATE RESPONSIBILITY UPDATE 2/2 Targets & Performance: Q2/2017 Focus area Issue, KPI, target value Comments Status Responsibility towards the employees OCCUPATIONAL HEALTH AND SAFETY Number of Total Recordable Injury Frequency (TRIF) (per million hours, Kemira + contractor, year-to-date 1 ) Achieve zero injuries (TRIF 2.0 by end of 2020) KPI reported quarterly EMPLOYEE ENGAGEMENT Employee engagement index based on Voices@Kemira biennial survey The index at or above the external industry norm Participation rate in Voices@Kemira 75 % or above KPI reported biennially LEADERSHIP DEVELOPMENT Leadership development activities provided, average Two (2) leadership development activities per people manager position during KPI reported annually Behaviour Based Safety (BBS) program pilots moving ahead as planned, and next 10 sites implementation starts in Q3 (YTD: 4). To improve our contractor safety we have launched Contractor Safety Program which is looking contractor safety from contracting to materialization of the contracted work. We aim to confirm the next Voices@Kemira survey by Q High level of activity continued, with 191 leadership development activities provided during Q (target: 75 per quarter) Behind target In progress Achieved 84% 70% % 58% 85% 67% Engagement Q2 Participation Behind target In progress Achieved Q2 Target 2020 Behind target In progress Achieved 1 The TRIF reporting has been changed to a year-to-date figure instead of 12 month rolling average that was previously used. 2 The cumulative amount of leadership development required to reach two (2) leadership development activities per people manager position during equals 1500 leadership activities (when number of people manager positions is ). Development activities include job rotations, coaching and mentoring, and development programs. Capital Markets Day September 21,

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