Petri Castrén May, Kemira. Credit investor presentation

Transcription

1 Petri Castrén May, 2014 Kemira Credit investor presentation

2 Disclaimer This presentation contains, or may be deemed to contain, forward-looking statements. These statements relate to future events or our future financial performance, including, but not limited to, strategic plans, potential growth, planned operational changes, expected capital expenditures and future cash sources and requirements, that involve known and unknown risks, uncertainties and other factors that may cause Kemira Oyj s or its businesses actual results of operations, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. In some cases, such forward-looking statements can be identified by terminology such as may, will, could, would, should, expect, plan, anticipate, intend, believe, estimate, predict, potential, or continue, or the negative of those terms or other comparable terminology. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Future results may vary from the results expressed in, or implied by, the forward-looking statements contained in this presentation, possibly to a material degree. All forwardlooking statements made in this presentation are based on information presently available to management and Kemira Oyj assumes no obligation to update any forward-looking statements, unless obligated to do so under applicable law or regulation. 2

3 Agenda Our business Our strategic focus Review of financials Key debt metrics Potential bond transaction Appendix

4 1. Our business 4

5 Kemira global EUR 2.2 billion chemicals company KEMIRA HEADQUARTERS Helsinki, Finland NORTH AMERICA 30% 1,300 O&M management Houston, USA Regional HQ Atlanta, USA M&I management Frankfurt, Germany EUROPE, MIDDLE EAST AND AFRICA 57% 2,600 ASIA PACIFIC 6% 340 Regional HQ Shanghai, China 4,500 employees 59 manufacturing sites Presence in ~40 countries Sales in > 100 countries SOUTH AMERICA 7% 250 Paper management Hong Kong Employees R&D and technology centers 5

6 Focus on paper, oil & gas, mining and water treatment Kemira in the value chain of WQQM* Expertise and tailored combinations of chemicals for waterintensive industries Improving our customers water, energy and raw material efficiency *) Water Quality and Quantity Management 6

7 Key figures EUR million (except ratios) Revenue 2,229 2,241 2,207 2,161 Operating profit, excluding non-recurring items % of revenue Gearing, % at period-end Personnel at period-end 4,453 4,857 5,006 4,977 7

8 Our business is organized into customer-based segments SALES BY SEGMENT (2013) OIL & MINING OPERATIVE EBIT BY SEGMENT (2013) PAPER 14% 11% 48% 30% 53% 28% 8% MUNICIPAL & INDUSTRIAL CHEMSOLUTIONS* 8% *) Kemira closed the divestment of formic acid business on March 6, The remaining business of ChemSolutions will be transferred to Paper and ChemSolutions will be discontinued. 8

9 We support pulp and paper producers in innovation and process efficiency Packaging, board and tissue grades 35% 1. PAPER, Revenue 2013: EUR 1,068 million Operative EBIT 2013: EUR 86.5 million, 8.1% margin Expertise We have unique expertise in applying chemicals and supporting pulp & paper producers to innovate and constantly improve their operational efficiency and endproduct quality. 45% Offering We develop and commercialize new products to fulfil customer needs and to ensure a leading portfolio for the pulp and paper industry. Chemical, mechanical and recycled pulp 20% Paper grades Market position: #1 in EMEA #2 in North America, South America and APAC 9

10 Our innovative chemicals improve yield in oil, gas and metals recovery Business management Minerals & Metals 20% 2. OIL & MINING, Revenue 2013: EUR 312 million Operative EBIT 2013: EUR 17.4 million, 5.6% margin Expertise We provide a unique combination of innovative chemicals and application knowledge that improves process efficiency and yield in oil, gas and metals recovery. Offering We use our in-depth understanding of extraction processes to tailor solutions for water management and reuse. 80% Business management Oil & Gas Market position: #2 in unconventional Oil & Gas in North America. 10

11 With our chemistry we enable the whole range of water treatment Other 3. MUNICIPAL & INDUSTRIAL, Revenue 2013: EUR 659 million Operative EBIT 2013: EUR 45.8 million, 6.9% margin Polymers 25% 10% Expertise We enable our customers to improve their water treatment efficiency by providing value adding support and high performing chemicals. Offering We are the only company that manufactures and supplies such a broad range of water treatment chemicals both polymers and coagulants, as well as antiscalants, defoamers and water disinfectant. 65% Coagulants Market position: In water treatment chemicals #1 in EMEA #2 in North America 11

12 2. Our strategic focus INNOVATION We invest in innovation and expertise. BUSINESS FOCUS We provide expertise and chemicals for water-intensive industries. GROWTH We target profitability and above-themarket growth. GEOGRAPHICAL FOCUS We strengthen position in mature markets and expand selectively in emerging markets.

13 Expanding to leadership in target markets Redesign Reach target profitability by implementing Fit for Growth Focus Achieve a sustainable position in key markets Accelerate Grow in emerging markets through new products & services Expand Become leader in target markets. 13

14 Transformation into a water pure-play is now accomplished New organization structure Fit for Growth Performance management system Sharpened strategy 3F and Soto acquisition Acquisition of BASF s AKD emulsion business Q Result AGM 2014 Divestments JV Sachtleben Food and pharmaceuticals business Coagulants business in Brazil Danish distribution business Formic acid business 14

15 Differentiated products revenue share increasing to 50%, after the announced portfolio changes 40% 50% In differentiated products we are looking for innovation-driven growth above the market. Higher value to customer means higher margins. 60% 50% In commodity products we are aiming to maximize profitability and cash flow * *) Pro forma revenue split, including the revenue impact of all the already announced M&A activities. 15

16 Double-digit revenue growth in polymers, sizing and strength in Q Other process chemicals +3% Sizing and strength +13% 12% 11% 19% EUR 530 million Coagulants -17% 24% Bleaching and pulping +1% Polymers +14% Differentiated products Commodity products 22% 8% 4% *) Propionic acid and acetates divested on March 1, 2013 and formic acid on March 6, 2014 Other commodities 0% Organic acids* -60% 16

17 Leverage mature markets and expand in selected emerging markets Innovation driven growth in mature markets Emerging market revenue expected to grow from 14% to 16% in 2016 Paper, O&M and M&I Paper, O&M and M&I Paper (China, Indonesia and South Korea) O&M and Pulp & Paper O&M (Middle East and Africa) 17

18 M&A strategy focusing to strengthen market position in the core segments 30% gearing in Q provides capacity for inorganic growth 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) 18

19 Capital allocation focuses on high growth product lines Capex split average Capex split in % 50% 50% 65% Commodity products Differentiated products 19

20 Innovation revenue target EUR 250 million in 2016 Revenue from new products or from products into new applications launched within the past 5 years Targeting to double innovation revenue from 5% in 2012 to ~10% of total sales in 2016 EUR 106 million EUR 160 million CONTRIBUTING TO 2013 S INNOVATION REVENUE Paper Expanding Fennobind binder production capacity sets the stage for second-generation Fennobind product launch. FennoBond benefits boardmakers, graphical papermakers, and also tissue and towel manufacturers. Oil & Mining Focus on shale gas including friction reducers and microbial control enhancements. New tagged scale inhibitor products enable measurement of scale inhibitor levels at oil and gas wells. Tailoring binders that minimize bentonite need and more innovation projects at commercialization phase. NEW INNOVATION AREAS: Next Fennobind generation Tagged antiscalants Guar replacement New friction reduction technology Rheology modifiers 20

21 Streamlined strategic structure with clear focus on water quality and quantity management Growth Paper Global business with SA focusing on pulp chemicals Cash optimization Municipal & Industrial Regional business with focus on EMEA and NA Re-entry into emerging markets once legislation comes into force Oil & Mining Oil & Gas focus on Americas and EMEA Mining focus on EMEA and SA 21

22 3. Review of financials

23 Key figures and ratios EUR million (except ratios) Revenue 2,229 2,241 2,207 2,161 Operating profit, excluding non-recurring items of which margin Share of profit or loss of associates Financing income and expenses Capital expenditure, including M&A Cash flow after capital expenditure Cash flow return on capital invested (CFROI), % Equity ratio, % Gearing, % at period-end

24 Expansion, maintenance and improvement CAPEX trend EUR million Expansion Maintenance and improvement 24

25 Portfolio restructuring and increased profitability improved return on capital employed Kemira operative ROCE* 11.1% 11.9% 12.0% 10.4% 9.9% Q1 Q2 Q3 Q4 Q EUR million, expect ratios Mar 31, 2014* Mar 31, 2013* Revenue 2, ,248.9 Goodwill Other intangible assets Property, plant and equipment Net Working Capital ratio 10.6% 12.1% Operative EBIT *Rolling 12 months 25

26 Stable cash flow generation Net cash generated from operating activities Cash flow after investments 26

27 Outlook for 2014 and financial targets for Revenue Operative EBIT EUR 2,229 million EUR million 0%-5% organic growth* increase 5%-15% Revenue Operative EBITDA margin Gearing EUR 2,229 million 11.3% 41% EUR billion 15% below 60% *) Revenue growth in local currencies, excluding the impact of acquisitions and divestments 27

28 4. Key debt metrics

29 Profitability and balance sheet have been the main focus in the strategy implementation Net debt/ operative EBITDA* Net debt Q *operative EBITDA based on rolling 12 month figure 29

30 Kemira s aim is to remain below gearing of 60% 60% 50% 40% 39% 38% 42% 41% 30% 30% 20% Q

31 Strong financial position supporting future growth opportunities Kemira average interest rate (at the end of the period) 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2.0% 2.0% 1.6% 1.5% Debt maturity profile, EUR million Gross debt Undrawn EUR 400 million year Revolving Credit Facility 31

32 Debt portfolio EUR 484 million at the end of Q EIB and NIB EUR 270 million 270 EUR 484 million Commercial papers EUR 106 million Bank loans EUR 60 million Other EUR 19 milion Pension loans EUR 29 million -Undrawn committed credit facilities at the end of Q totaled to EUR 445 million (RCF EUR 400 million and EIB loan EUR 45 million) 32

33 5. Potential bond transaction 33

34 Potential bond transaction Issuer: Status: Amount: Maturity: Coupon: Documentation: Covenants: Clearing: Listing: Indicative terms and conditions Kemira Oyj Senior, unsecured EUR 200 million expected 5 years Fixed, annual Stand-alone, under Finnish law Change of control, Cross default, Negative pledge (bonds) Euroclear Finland (RM) Nasdaq OMX Helsinki Denominations: EUR 100, ,000 Bookrunners: Nordea Markets and Pohjola Markets Kemira is conducting an investor roadshow in connection with its potential bond issue The transaction size is expected at EUR 200 million and the maturity under discussion is 5 years Investor meeting in the Nordic countries will be held on May 9 th 14 th 34

35 6. Appendix 35

36 Kemira manufacturing footprint Manufacturing footprint globally (59 sites): EMEA North America South America 20 multipurpose, 30 coagulants, 9 commodity chemicals Multipurpose APAC Coagulants Commodity chemicals Yanzhou 36

37 Operating expenses were EUR 2.1 billion in 2013 Kemira s main raw materials are: electricity (bleaching), acrylonitrile, acrylic acid, cationic monomer (polymers), hydrochloric acid, sulfuric acid and aluminium hydrate (coagulants) 26% 58% 16% Materials and services and change in inventories Personnel expenses Other expenses 37

38 Sales prices and variable costs trend Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Brent oil, USD Sales price* Variable costs* Q4 Q *) 12-month rolling change vs previous year, meur, excl. Tikkurila and Pigments 38

39 Paper segment January-March 2014 EUR million Q1/2014 Q1/2013 % % Revenue ,068 1,006 6 Operative EBITDA of which margin Operative EBIT of which margin Capital expenditure Cash flow

40 Paper segment - Technology and market leader in paper wet-end chemistry 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 40

41 Paper segment - Demand for sizing and strength chemicals is growing fastest globally Pulp and paper industry trends increasing chemical demand: Increased use of recycled fibres Hardwood replacing softwood in virgin pulp Lightweighting of packaging and board grades Higher filler loads in graphic papers New digital printing methods Lower water / energy consumption Market size, EUR billion (CAGR: 2.4%) % 1.3% 3.0% 2.0% 3.5% GAGR Defoamers, biocides and other wet-end process chemicals Polymers Miscellaneous commodity chemicals Sizing and strength Bleaching chemicals 41

42 Oil & Mining segment January-March 2014 EUR million Q1/2014 Q1/2013 % % Revenue Operative EBITDA of which margin Operative EBIT of which margin Capital expenditure Cash flow

43 Oil & Mining segment - Winning market share with competitive combination of innovation chemicals and application knowledge RAW MATERIALS INTERMEDIATES PRODUCTS APPLICATIONS CUSTOMERS Acrylonitrile Acrylic acid Various monomers Miscellaneous specialty chemicals and commodities Acrylamide Polymers Dispersants & Antiscalants Biocides Emulsifiers Defoamers Coagulants Formulations Friction Reduction Formation & Well Scale Control Asset integrity Microbial Induced Corrosion Enhanced Oil Recovery Drilling muds Concentrate thickening Mineral slurry preservation Mining processes Scale Control Pumpers Oil & Gas operators Service companies Mine operators Value chain part covered by Kemira 43

44 Oil & Mining segment - Strong market growth across all product lines High oil price spurs demand for identifying new sources Global growth of shale gas and wet shale Declining ore assays require improved processing Increasing environmental pressure which increases demand for waste water treatment Market size, EUR billion (CAGR: 4.7%) Polymers Defoamers, biocides and other process chemicals Miscellaneous commodity products 44

45 Municipal & Industrial segment January-March 2014 EUR million Q1/2014 Q1/2013 % % Revenue Operative EBITDA of which margin Operative EBIT of which margin Capital expenditure Cash flow

46 Municipal & Industrial - Commodity product lines expected to grow, but slightly slower than the market Demand drivers for raw and waste water as well as sludge treatment chemicals: Legislation and regulatory enforcements determine required treated water and sludge quality standards Water reuse is most cost efficient solution to meet the increasing water demand Realized restructuring charges, EUR billion % 2.8% 3.2% Coagulants GAGR Polymers Antiscalants, biocides, defoamers, miscellaneous commodity chemicals 46

47 Municipal & Industrial - Technology and market leader in raw and waste water as well as sludge treatment Kemira is the only major supplier producing major water treatment chemicals, polymers and coagulants thereby enabling comprehensive application support Cost competitiveness through backward integration into virgin raw materials 60-70% of sourced raw materials are recycled utilizing waste streams from industrial producers, providing an additional cost advantage RAW MATERIALS INTERMEDIATES PRODUCTS APPLICATIONS SALES CHANNEL CUSTOMERS Acrylonitrile Sulfuric acid Hydrochloric acid Aluminium hydrate Iron ore Pickling liquor Copperas Acrylamide Polymers (EPAM, DPAM) Al Coagulants Fe Coagulants Raw water treatment Wastewater treatment Sludge treatment Direct sales Distributor/reseller Service companies Municipalities Private operators Industrial customers Value chain part covered by Kemira Antiscalants Biocides Defoamers Advanced water treatment 47

48 ChemSolutions segment January-March 2014 EUR million Q1/2014 Q1/2013 % % Revenue Operative EBITDA of which margin Operative EBIT of which margin Capital expenditure Cash flow

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