Investor presentation

Transcription

1 February 2017 Investor presentation Kemira today (slides # 2-14) Latest news and financials (# 15-37) Pulp & Paper (# 38-48) Oil & Mining (# 49-57) Municipal & Industrial (# 59-67) BOOST (# 69-73) Appendix (# 74-83)

2 Finnish Industrial Week in China on June 12-16, 2017 Four leading companies will host Finnish Industrial Week in China. During the week you will have the opportunity to join the site visits and learn more about the businesses through presentations. Save the dates in your calendar! A formal invitation, including the detailed program and registration details will follow. For further information please contact Ms. Tiina Huoponen tiina.huoponen@kemira.com / tel

3 Kemira today Kemira is a global chemicals company serving customers in water-intensive industries 2.4 Revenue in EUR billion 12.8% Operative EBITDA margin 4,818 Personnel 63 Manufacturing sites 110 Ship-to countries 32,000 Shareholders Figures as of 2016 Investor Presentation - February

4 Focused on three segments Similar technology and sites drive cross-segment synergies 62% of group revenue 13% of group revenue 25% of group revenue Pulp & Paper Leading global pulp and paper chemical supplier Oil & Mining Growing chemical supplier to Oil, Gas and Mining industries Municipal & Industrial Market leader in water treatment chemicals in Europe and North America Operative EBITDA 13.4% #1 Market Position Operative EBITDA 5.9% #2* Market Position Operative EBITDA 14.9% #1 Market Position Figures as of 2016 *) in dry and emulsion polyacrylamides Investor Presentation - February

5 Our customers and competitors Customers (examples) Competitors (examples) + ~6000 municipalities in water treatment Investor Presentation - February

6 Innovation and R&D cornerstone for competitive edge Kemira has built expertise in chosen fields of chemistry and customer applications since decades Around 1,100 granted patents represent the vast amount of knowhow Currently 250 R&D experts located in Finland, USA and China Latest development areas, e.g. Lighter and stronger board Sludge dewatering Tailored polymers for harsh conditions (CEOR) Investor Presentation - February

7 Profitable growth achievements & ongoing projects Opening / expansion of site Opening of Nanjing (CN) multipurpose site Q1/ % Q2/14 Start-up of EMEA service center Acquisition BASF AKD emulsion Opening of Tarragona coagulant site (ES) Q3/14 Acquisition 12.8% 2013 operative EBITDA 2016 operative EBITDA Q4/14 Expansion of dry and emulsion polyacrylamide (US) Q1/15 Operational efficiencies Q2/15 Acquisition of Soto Industries (US) Q3/15 AkzoNobel s paper chemicals acquisition Expansion of pulp chemicals, Oulu (FI) Closure of Longview (US) Closure of site 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) Decision to close Zaramillo (ES) Q2/16 Q3/16 Bradford (UK) expansion San Giorgio (IT) expansion Ottawa (CA) closure Botlek (NL) modernization Transportation agreement with Odyssey BOOST operational excellence program launch Q4/16 Investor Presentation - February

8 87% of Group on track market weakness visible in O&M Revenue (EUR million), organic growth and operative EBITDA margin Pulp & Paper Oil & Mining Municipal & Industrial +6% +3% -1% +15% -18% -11% -7% +1% 0% 1,170 1,417 1, % 13.4% 11.7% % 9.6% 5.9% % % 14.9% Investor Presentation - February

9 Targeting above-the-market revenue growth with operative EBITDA margin of 14-16% Financial targets (mid- to long-term) Revenue EUR 2.1 billion EUR 2.4 billion EUR 2.4 billion Above-the-market growth Operative EBITDA margin 11.8% 12.1% 12.8% 14-16% Gearing 42% 54% 54% Below 60% Investor Presentation - February

10 Kemira s market environment Long-term drivers for growth, including: Recycling leading to higher usage of strength chemicals Online shopping increasing need for packaging material Growing middle class in emerging markets leading to higher usage of tissue, board, paper Regulation driving better water quality Increased oil drilling from existing fields Challenges Modest global GDP growth Low oil price impacts negatively activity in oil industry, particularly shale market Kemira s relevant market EUR billion +2% 2.4% % % P&P O&M M&I Source: Management estimation based on various sources Investor Presentation - February

11 All segments aiming for profitable growth Mid- to long-term targets Pulp & Paper 62% of Group s revenue (1-9/2016) Growth 2 X market growth Oil & Mining 13% of Group s revenue (1-9/2016) Growth Double-digit growth-% over-the-cycle Municipal & Industrial 25% of Group s revenue (1-9/2016) Growth Steady growth of 2-4% Profitability In-line with Group target Profitability Over-the-cycle profitability in-line or above the Group target Profitability Slightly below Group target Investor Presentation - February

12 Profitable growth drivers Pulp & Paper Winning Formula Excel in basic game Bleaching chemical capacity additions New Total Chemistry Management (TCM) contracts Capture acquisition synergies Oil & Mining CEOR - tailored polymers for harsh conditions in Chemical Enhanced Oil Recovery Oil sands tailings treatment Recovery of shale market Municipal & Industrial Geographic expansion Expansion in business application offering Advanced Water Treatment (AWT) BOOST program operational excellence Selective acquisitions Investor Presentation - February

13 Our key actions for higher margins Operative EBITDA margin 14-16% 12.1% 12.8% 11.8% AkzoNobel s paper chemicals business New investments (Brazil and Finland), New TCM contracts Optimization of operations: e.g. Logistics, Sourcing, Manufacturing CEOR & oil sands Advanced Water Treatment Synergies from acquisitions Pulp & Paper BOOST - operational excellence Oil & Mining Municipal & Industrial Mid- to longterm target Estimated end of 2016 run-rate Above 50% Below 50% Low Low Low Full run-rate by End of yrs 3-5 yrs 3-5 yrs Investor Presentation - February

14 Dividend proposal EUR 0.53 per share, yield of 4.4% Kemira s dividend policy is to pay a stable and competitive dividend Board of Directors proposal to the AGM a dividend of EUR 0.53 per share, totaling EUR 81 million Kemira has paid dividend 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 % * 5.8% 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 * BoD proposal to the AGM Investor Presentation - February

15 Our strategy for profitable growth Capture growth trends and drive profitability improvement further in Pulp & Paper and Municipal & Industrial Short-term mitigation and seize growth opportunities in Oil & Mining Clear accountability on ongoing CAPEX projects BOOST efficiency of operations Investor Presentation - February

16 Latest news and financials Investor Presentation - February

17 Financial highlights 2016 FY 2016 Revenue approximately at prior year level Organic growth -2% as a combination of sales volume growth and lower sales prices Operative EBITDA improvement driven by increased sales volumes, margin to 12.8% Lower sales prices were offset by lower variable costs Pulp & Paper and Municipal & Industrial improved margin by over 1 percentage point, to 13.4% and 14.9% respectively EPS supported by higher profitability as well as gain on the sale of electricity assets Dividend proposal EUR 0.53, stable dividend according to policy EUR million (except ratios) Δ% Revenue 2,363 2,373 0 Operative EBITDA of which margin, % 12.8% 12.1% Operative EBIT of which margin, % 7.2% 6.9% Net profit EPS, EUR DPS, EUR (2016 proposal) Investor Presentation - February

18 Pulp & Paper Substantial improvement in profitability Volume growth continued in 2016 Organic growth impacted by sales prices Volumes grew especially in bleaching and strength chemicals Operative EBITDA margin 13.4% Synergy capture ahead of initial plan Successful start-up in Brazil Higher capacity utilization Investment in Joutseno, Finland Proceeding on time and in budget Good investment for the long-term Revenue and reported growth EUR million 1,417 +3% 1, Operative EBITDA and operative EBITDA margin EUR million % +14% % Investor Presentation - February

19 Oil & Mining Volatile shale market impacted Kemira Revenue declined in 2016 mainly due to low activity in shale oil & gas fracking Shale market seems to have bottomed during summer, Kemira s revenue in shale business increased at double-digit rate in the fourth quarter Revenue in Mining and Other industries declined driven by pricing CEOR* development two-folded Progress with one O&G operator Long sales cycle and competitive environment, one customer in APAC lost New clients won in oil sands Revenue and reported growth EUR million Operative EBITDA and operative EBITDA margin EUR million % -12% -45% % * CEOR = Chemical Enhanced Oil Recovery Investor Presentation - February

20 Municipal & Industrial Strong improvement in profitability Solid volume growth in 2016 Decreasing sales prices kept organic growth at flat Negative currency development leading to lower absolute revenue Strong improvement in profitability Higher sales volumes Customer focus Lower input costs Efficiency enhanced Sites in Ottawa, Canada and Zaramillo, Spain closed Revenue and reported growth EUR million 606-2% Operative EBITDA and operative EBITDA margin EUR million 83 +7% % 14.9% Investor Presentation - February

21 Outlook for 2017 Kemira expects its operative EBITDA to increase from the prior year (2016: EUR million). EUR million outlook Operative EBITDA Increase Investor Presentation - February

22 10 th consecutive quarter for y-o-y operative EBITDA growth Q Group s organic growth -1% despite volume growth of 2% Sales volumes grew in Oil & Mining at double-digit rate Operative EBITDA +3% to EUR 70 million in a seasonally weaker quarter Kemira Group revenue bridge Q EUR million % -4% +1% 0% 596 Sales Sales Currency Acquisitions volumes prices impact Operative EBITDA and operative EBITDA margin trend EUR million % 12.6% 12.5% 11.3% 12.5% 13.4% 13.6% % Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Investor Presentation - February

23 Pulp & Paper Q4 shadowed by maintenance breaks Organic growth -2% due to maintenance breaks and competitive pressure on pricing, however sales volumes grew Profitability at prior year level despite maintenance breaks Synergy capture progressed well End of 2016 run-rate EUR 14 million, target end of 2017 EUR 20 million Revenue and organic revenue growth (y-on-y) EUR million % +5% +3% +2% +3% +1% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q % -2% Operative EBITDA and operative EBITDA margin trend EUR million % 11.8% 12.3% 12.6% 13.2% 13.7% 14.2% % Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Investor Presentation - February

24 Oil & Mining revenue growth y-o-y first time since Q1/15 Oil & Gas turned the tide and lifted segment s revenue to 5% organic growth Shale market has bottomed and revenue grew in the business at double-digit rate Oil sands and CEOR continued to grow, however one lost CEOR deal will impact 2017 Mining volumes flat, pricing impacting figures Revenue from Other industries stable Revenue and organic revenue growth (y-on-y) EUR million % -20% -15% -25% -19% -17% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q % +5% Operative EBITDA and operative EBITDA margin trend EUR million % 12.7% % % % % 5.3% 3.9% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Investor Presentation - February

25 Municipal & Industrial Profitability improvement continued Organic growth declined due to lower prices in polymers while volumes were flat Significant improvement in profitability to 14.0% compared to 11.6% in Q Improvement supported by manufacturing efficiency and favorable variable cost development Q4/15 was impacted by temporary cost increases Revenue and organic revenue growth (y-on-y) EUR million % +3% +2% +2% +1% +2% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q % -3% Operative EBITDA and operative EBITDA margin trend EUR million % 14.3% 15.5% 12.7% 16.3% 16.4% % % 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Investor Presentation - February

26 Input cost increase now becoming visible Kemira variable cost structure 2016 EUR 1.3 billion Logistics 20% 20% Oil direct + indirect (e.g. Acrylonitrile, Alpha-olefins, Sodium chloride, ASA, Acrylic acid, Acrylic ester, Petroleum solvents,) Variable cost vs sales price trend % 45% Electricity and energy used in production and as a raw material Raw materials and goods not impacted by oil price (e.g. Sodium hydroxide/ Caustic soda, Colloidal silica, Aluminium hydrate, Fatty acid, Amines, Sulfuric acid, Paper dyes) Brent oil, USD Sales price* Variable costs* * 12-month rolling change vs previous year in EUR million Investor Presentation - February

27 Investments into growth Capital expenditure excl. acquisitions approximately EUR 200 million in 2017 Capital expenditure excl. acquisitions* EUR million Q1 Q2 Q3 Q4 * Excluding acquisitions: AkzoNobel s paper chemicals business in Q2 2015, Soto Industries in Q and Polymer Services in Q EUR million (except ratios) Capex excl. acq Pulp & Paper Oil & Mining Municipal & Industrial Capex split per category 100% 100% 100% Expansion 45% 43% 43% Improvement 27% 29% 27% Maintenance 28% 28% 28% Investor Presentation - February

28 Cash flow improvement continued Cash flow from operations EUR million Cash flow after investing activities EUR million Investor Presentation - February

29 Solid balance sheet Net debt decreased to EUR 634 million with average cost of debt 2.1% Debt portfolio well diversified Bonds EUR 350 million Bank loans EUR 358 million Other EUR 99 million Undrawn facilities EUR 400 million Net debt / operative EBITDA and Gearing % 54% Net debt 642m Net debt 634m Net debt maturity profile, end of Q EUR million Investor Presentation - February

30 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 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 Investor Presentation - February

31 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 (*2016 proposal to the AGM) * 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, % Investor Presentation - February

32 Pulp & Paper Key financials EUR million 2012* Revenue 1,047 1,068 1,170 1,417 1,457 Operative EBITDA of which margin 10.4% 12.2% 11.7% 12.1% 13.4% Operative EBIT of which margin 7.3% 8.1% 7.3% 6.8% 7.7% Capital expenditure Cash flow after investing activities * Restated figures reflect the change of IAS 19, Employee Benefits Investor Presentation - February

33 Oil & Mining Key financials EUR million 2012* Revenue Operative EBITDA of which margin 12.6% 10.5% 12.7% 9.6% 5.9% Operative EBIT of which margin 8.1% 5.6% 7.8% 3.2% -1.2% Capital expenditure Cash flow after investing activities * Restated figures reflect the change of IAS 19, Employee Benefits Investor Presentation - February

34 Municipal & Industrial Key financials EUR million 2012* Revenue Operative EBITDA of which margin 9.3% 10.4% 12.1% 13.7% 14.9% Operative EBIT of which margin 5.7% 6.9% 7.7% 9.1% 10.4% Capital expenditure Cash flow after investing activities * Restated figures reflect the change of IAS 19, Employee Benefits Investor Presentation - February

35 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% Investor Presentation - February

36 Revenue split by product line FY 2016 % of total revenue in 2016 Polymers Sizing and strength Coagulants Bleaching & pulping chemicals Pulp & Paper 10% 27% 3% 34% 26% Oil & Mining 62% - 3% 11% 24% Municipal & Industrial 21% - 65% 4% 10% Kemira 20% 16% 19% 23% 22% Other (e.g. defoamers, dispersants, biocides) Investor Presentation - February

37 Revenue and cost distribution per currency Currency exchange rates had EUR -2 million impact on the operative EBITDA in 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 Kemira cost distribution 2016 USD 35% USD 31% EUR 44% CAD 4% BRL 3% CNY 3% Others 11% EUR 41% SEK 8% CAD 4% CNY 4% Others 12% Investor Presentation - February

38 Kemira investment case highlights Above-the-market growth Increasing profitability Strong operating cash flow Stable and competitive dividend Investor Presentation - February

39 Pulp & Paper on track for profitable growth Investor Presentation - February

40 Pulp & Paper chemicals Revenue EUR 1,457 billion, Operative EBITDA EUR 195 million, margin 13.4% Customers, examples 40% Pulp production Customer mills 20% Paper production 40% Board & tissue production Geographies 35% Americas 50% EMEA 15% APAC 10% Other 10% Polymers 20% Defoamers, dispersants, biocides and other process chemicals Products 35% Bleaching and pulping 25% Sizing & strength Note: Revenue by industry, product and geography rounded to the nearest 5% Investor Presentation - February

41 Pulp & Paper market is expected to grow at 1% CAGR* Relevant target market (EUR billion) market data updated in September 2016 Packaging & Tissue ~9 +1% ~ % SA ~9 +1% ~ % APAC 2-3% Printing & Writing -1.5% NA -1-0% Pulp 1-2% CAGR EMEA % CAGR *) Management estimation based on various sources Investor Presentation - February

42 Long-term commitment to pulp and paper * Ciba #1 AkzoNobel #2 BASF #3 Hercules #4 Kemira #5 Kemira (pulp and paper) #1 BASF (paper) #2 Solenis (paper) #3 AkzoNobel (pulp) #4 Ecolab (paper) #5 Nalco #6 *) Management estimation based on various sources Investor Presentation - February

43 Clear Winning Formula to increase profitability Invest in growth and R&D Improve customer experience Enhance performance culture Operative EBITDA 14-16% Maximize capacity utilization Reduce complexity Manage fixed costs Investor Presentation - February

44 Bleaching chemical investments proceeding well Sodium chlorate plant for Klabin in Brazil successfully started up in March 2016 Secure business with long-term contract Ramp-up of chlorate plant completed ahead of plan Adding sodium chlorate capacity in Finland New pulp mill projects and capacity expansions in Nordics These confirmed pulp capacity increases are expected to increase chlorate demand Construction at Joutseno on time The new chlorate production unit is expected to be in operation in Q Investor Presentation - February

45 Synergy target raised to EUR 20 million Smooth integration of AkzoNobel paper chemicals acquisition progressed better than expected Synergy expectation increased from EUR 15 million to EUR 20 million as a run-rate by end of 2017 Run-rate EUR 14 million at the end of 2016 Contract Manufacturing Agreements with AkzoNobel ending gradually, estimated to be near completion by mid Synergies per category Target run-rate by end of 2017 Sourcing 20% Manufacturing 40% Sales, General & Admin 40% TOTAL EUR 20 million Investor Presentation - February

46 Profitability improvement case Pulp & Paper APAC Profitability improvement driven by several factors New site in Nanjing, China opened in 2014 Synergies from acquisition of Akzo Nobel paper chemicals New contracts won due to improved position and increased local production Business on good path to continue profitable growth, revenue in 2016 EUR 178 million Operative EBITDA margin Target Revenue Investor Presentation - February

47 INNOVATION CASES Superior print quality and fast ink drying in high speed inkjet printing Kemira KemPrint - The new normal in high speed inkjet printing PULP & PAPER We enable more efficient raw material use We improve process efficiency and runnability We enhance end-product quality Improved cleanliness of process means more tons of board produced in highest hygiene standards Kemira FennoClean - Meeting high hygiene targets of food-packaging board FennoBond enables usage of lower quality furnishes with maintained strength properties Kemira FennoBond - Stronger board using less fibers Improved paper machine operational efficiency and less defects in the final paper and board Kemira KemFlite - Increased paper machine performance and resource efficiency Investor Presentation - February

48 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 Investor Presentation - February

49 Summary our actions for profitable growth Continue execution of Winning Formula Synergy realization from acquisitions Further increase market share in APAC New Total Chemistry Management contracts Ramp-up chlorate production in Brazil Chlorate expansion in Joutseno, Finland Complexity reduction Investor Presentation - February

50 Oil & Mining positioning for the recovery Investor Presentation - February

51 Oil & Mining chemicals Revenue EUR 310 million, Operative EBITDA EUR 18 million, margin 5.9% 25% Minerals & Metals 35% Process chemicals to other industries Customers 40% Oil & Gas Customers, examples Geographies 65% Americas 35% EMEA 40% All others Products 60% Polymers Note: Revenue by industry, product and geography rounded to the nearest 5% Investor Presentation - February

52 Market development in Oil & Gas industry US Oil & Gas Rotary Rigs 2,500 8/2008: 2,031 2,000 9/2014: 1,931 WTI Oil Price ($/bbl) ,500 1,000 EO2016: /2016: Avg 1,768 1,879 1,090 1,546 1,879 1,919 1,761 1, Y-o-Y +6% -42% +42% +22% +2% -8% +6% -47% -48% Sources: Baker Hughes and Federal Reserve Bank of St. Louis Investor Presentation - February

53 Positioning for recovery in Oil & Mining Balanced focus on short term profitability and longer term growth Manage operating costs and capital expenditure Focused investments in growth and innovation will drive our goals Increasing profitability and share in Shale business new channels, products Increasing market share and growing revenues in oil sands and CEOR Becoming the global innovation leader in CEOR* * CEOR = Chemical Enhanced Oil Recovery Monetizing our current R&D project portfolio in mining Continue to grow our process industry portfolio Investor Presentation - February

54 Growing revenues and gaining market share in CEOR CEOR remains the largest growth opportunity with Kemira gaining traction across the industry Market size is estimated to be around EUR 1 billion and it is expected to grow 12-15% CAGR in the long-term Polymer flooding improves recovery rate of conventional oil producers Kemira well positioned to capture this growth opportunity through knowhow and patented R&D of polymer technology Kemira supplying polymers to major O&G operator Business development opportunities for additional CEOR supplies being pursued Type of client Major global O&G operator Success story Significant progress made both in new product development and commercialization Investor Presentation - February

55 Growing revenues and gaining market share in oil sands Oil sands another key growth market Market size is estimated to be around EUR 400 million Canadian Producers expect oil sands production to grow ~3% p.a. through 2030 Legislation in Canada requires treatment of oil sands tailings Kemira entered market in 2015 Kemira offers a fully-tailored offering including patented chemistries, equipment and services and Kemira is gaining traction with industry leaders Kemira is engaged in a multi year contract supplying products to a major, Canadian oil sands owner and operator Kemira is engaged in the supply of polymer hydration equipment and dry polyacrylamide to a major, multinational, oil & gas company with significant oil sands assets Investor Presentation - February

56 Oil & Mining Strengthening position with 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 Main competitors: SNF, Solvay, Ecolab, multiple small chinese companies Investor Presentation - February

57 Strengthening market position across all product lines OIL & MINING OIL & GAS MARKETS Enhanced oil recovery Improved oil recovery Stimulation Production Drilling & cementing Oil sands MINING Iron ore Copper Gold OIL & GAS APPLICATIONS Friction reduction, Scale control, Microbial control, Drilling mud rheology control, Oil-based mud emulsification, EOR polymer flooding, Conformance control & Profile modification, SAGD water clarification and oil separation MINING APPLICATIONS Concentrate and tailings thickening, Rheology modification, Mineral slurry preservation, Scale control, Metal contaminant removal PRODUCTS Polymers, Dispersants & Antiscalants, Biocides, Emulsifiers, Defoamers, Coagulants, Service equipment VALUE Improved: Process efficiency Yield Cost efficiency Water efficiency Energy efficiency Compliance with environmental regulation Investor Presentation - February

58 INNOVATION CASES Kemira s high performance polymer technology is improving water recovery in the extraction process delivering significant operational costs savings for customer Oil sands, Alberta, Canada Improved performance and economics Kemira KemSweep tailored polymers, an integral part of the Kemira MaxXtract portfolio offering, improve the sweep efficiency and enable customers to extract more than 30% oil while extending the field lifecycle Enhanced Oil Recovery Designed to extract more OIL & MINING Kemira AMA Biocide is effectively reducing the risk of reservoir souring by mitigating microbial growth and activity for longer periods when compared to traditional industry practice. Kemira s dual-biocide application method on a hydraulic fracturing operation improves asset integrity and reduces operational costs Hydraulic Fracturing - Asset integrity and cost efficiency Kemira KemGuard detectable scale inhibitor is preventing mineral scale formation and deposition downhole. The use of the KemGuard technology resulted in extended squeeze profiles, providing cost reductions and long term revenue gain Offshore Oil & Gas production -Squeeze life optimization Investor Presentation - February

59 Summary well positioned for recovery Continued prudent cost discipline Readiness for recovery in shale industry Gaining revenues and market share in CEOR and oil sands Capturing growth opportunities in water process industries Investor Presentation - February

60 Municipal & Industrial strong profitability and organic growth Investor Presentation - February

61 Municipal & Industrial chemicals Revenue EUR 596 million, Operative EBITDA EUR 89 million, margin 14.9% Customers, examples 40% Industrial customers Customer split 60% Municipalities London Hamburg Montreal New York City Singapore Shanghai Barcelona Frankfurt Los Angeles Washington DC Toronto Edinburgh Berlin San Diego Philadelphia Melbourne Paris Stockholm Birmingham Miami Amsterdam Oslo Las Vegas Geographies 30% Americas 65% EMEA 5% APAC 15% Other products such as defoamers and biocides 20% Polymers Products 65% Coagulants Note: Revenue by industry, product and geography rounded to the nearest 5% Investor Presentation - February

62 Water treatment market expected to grow at 2% CAGR* Relevant target market (EUR billion) Antiscalants, Biocides, Disinfectants, Defoamers, Corrosion Inhibitors Polymers ~4.8 +2% ~ % 2% APAC MEA Europe ~4.8 +2% ~ % 4% 2% Coagulants % CAGR NA % CAGR *) Management estimation based on various sources Investor Presentation - February

63 Enabling clean water cycle Water purified with Kemira products in all segments (million m 3 ) We optimize the efficient utilization of resources at every stage of water management Our global water challenges in the production life cycle: 15,400 liters of water for production of 1kg of BEEF 1,200 liters of water for one PIZZA MARGHERITA 120 liters of water for 10 minute SHOWER ,000 MILLION M 3 WATER PURIFIED WITH KEMIRA S PRODUCTS IN million people do not have access to clean and safe water 2.4 billion people, 1 in 3, do not have access to adequate sanitation Investor Presentation - February

64 Growing business in Middle East, Africa and APAC Strong overall market position in North America and Europe with some pockets of underrepresentation Growth opportunities Middle East, Africa, APAC Growth also possible with expansion in application offering, e.g.: Polymers in North America Anti-scalants in Middle East Investor Presentation - February

65 Advanced Water Treatment is source of future growth AWT is combination of chemicals & intelligence Control, monitoring and dosing service Digitalization of application and data management Performance based business models Why focus on AWT In raw & waste water treatment, customers are receptive for AWT innovations that improve their efficiency High market growth Sticky business model AWT Chemicals market by application method Conventional vs. AWT Conventional chemicals sales Raw and waste water In-process +2% CAGR ~flat ~10% 3-4% Investor Presentation - February

66 Odor control system helps our customers to save money Dissolved sulfide probe Chemical storage tank with ultrasound level indicator UV measurement of dissolved sulfides Sewage M Headworks Sewage pipe M Automatic dosing pump Controlling center Liquid target upstream Kemira dosage algorithms automatically dose optimized levels of chemicals Sensors utilize compressed air cleaning and require minimal maintenance Remote access for logging, trending and reporting Dissolved sulfide probe (optional) = Lower operational costs Investor Presentation - February

67 Municipal & Industrial - Technology and market leader in raw and waste water as well as sludge treatment RAW MATERIALS INTERMEDIATES PRODUCTS APPLICATIONS SALES CHANNEL CUSTOMERS Acrylonitrile Sulfuric acid Hydrochloric acid Aluminium hydrate Iron ore Pickling liquor Copperas Acrylamide Cationic monomer 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 Main competitors: Coagulants: mainly local small companies, Feralco, USALCO Polymers: SNF, Ecolab, Solenis, BASF Investor Presentation - February

68 INNOVATION CASES MUNICIPAL & INDUSTRIAL We have a proven track record of successful innovation Reducing the amount of sludge helps reducing disposal costs. With Kemira Superfloc the solid content of sludge increased from 20% to 40%, while the total cost was kept constant Shanghai, China Eliminating odor from sewer systems through smart combination of chemicals, and online control and monitoring with Kemira S-Guard TM Palm Beach, Florida US Increasing yield and conversion capacity, and reducing sludge handling cost in biogas applications NSR, Helsingborg, Sweden Enabling compliance with the EU Bathing Water Directive fast and reliably with Kemira DesinFix TM Biarritz, France Investor Presentation - February

69 Summary continue to deliver profitable growth Further develop base business Improve North American profitability Manufacturing landscape in good shape to sustain high profitability with low capex requirements Capture AWT growth opportunity Grow business in Middle East, Africa and APAC Investor Presentation - February

70 BOOSTing profitability and cash flow Investor Presentation - February

71 Targeting EUR million of cost savings and EUR 50 million of inventory reduction 13,000 suppliers 200 warehouse locations 16,000 ship-tocustomers Supplier Kemira Customer Service Distribution center KemConnect TO- Customer 62 manufacturing sites 2,300 products 250,000 orders per year Investor Presentation - February

72 Improve competitiveness through efficiency Sourcing Product lifecycle management Transport management Order-to-cash Customer Collaboration Procureto-pay Manufacturing Network optimization Demand supply planning Supplier Kemira Customer Service Distribution center KemConnect Customer TO- Investor Presentation - February

73 Cost savings from EUR 250 million transportation spend Capture transportation sourcing savings Reduce operative execution costs Transportation lane optimization Load optimization Robust processes Tight carrier contract compliance management Transportation sourcing pilot done with logistics service provider Request for quotation for packed goods in EMEA Bids resulted >10% cost savings Loading of selected carriers ongoing Investor Presentation - February

74 Network optimization - to become demand driven 1 Distribution optimisation Execute warehouses replenishment based on consumption 2 Integration manufacturing with demand Shorten manufacturing cycles for replenishments 3 Reduce network complexity Reduce warehouse locations 4 Tank monitoring at customer Real-time visibility to customer warehouses and automatize replenishment Investor Presentation - February

75 Appendix Investor Presentation - February

76 Kemira s strategic goals & choices VISION The first choice in chemistry for water intensive industries PURPOSE We enable our customers to improve their water, energy and raw material efficiency VALUES We drive performance and innovation We are dedicated to customer success We care for people and the environment We succeed together CUSTOMER Pulp and paper Oil, gas and mining Municipalities and selected water intensive industries PEOPLE We aim to be the employer of choice by developing a safe and engaging working environment, where people can make an impact together and deliver innovation. Our leaders are empowering our people to use their drive, curiosity and talent to achieve their full potential. INNOVATION We innovate for the future through customer collaboration, technology roadmapping and partnerships. We utilize the opportunities of digitalization to improve our own performance as well as the services offered to customers. We focus on sustainable solutions. EFFICIENCY We apply a high cost discipline, focusing on operational efficiency and reducing complexity. We manage our assets and investments with care. GROWTH We grow through investments in expertise and production capacity, selective acquisitions, and by increasing our market share. We further strengthen our position in Europe and Americas, and selectively expand in APAC, Middle East and Africa. Investor Presentation - February

77 Kemira is truly global sales in more than 100 countries Manufacturing footprint globally (63 sites) Polymers and other process chemicals (24) Coagulants (29) Bleaching and pulping (10) R&D and technology centers Employees ASIA PACIFIC 10% EUR 228 million 651 Responsibility in manufacturing: We reduce greenhouse gas emissions by improving energy efficiency at manufacturing sites and purchasing energy at lower emission levels. AMERICAS 40% EUR 895 million 1,558 EUROPE, MIDDLE EAST AND AFRICA 52% EUR 1,239 million 2,609 Investor Presentation - February

78 Corporate responsibility contributing to value creation OUR GUIDING PRINCIPLES FOCUS AREAS OF OUR CORPORATE RESPONSIBILITY WORK EXECUTION OF OUR STRATEGY VALUE CREATION TARGETS IMPACTS OF OUR BUSINESS MODEL Vision, Values, Purpose, Strategic goals and choices STAKEHOLDERS EXPECTATIONS COMMITMENTS Kemira Code of Conduct Responsible Care UN Global Compact Sustainable products and solutions Responsibility towards employees Responsibility in our supply chain Responsible manufacturing Responsibility towards the communities we operate in Responsible business practises Creating value for Kemira and stakeholders Improving operational efficiency Ensuring compliance and managing risk Above-the-market revenue growth Operative EBITDA % Investor Presentation - February

79 CORPORATE RESPONSIBILITY UPDATE 1/2 Targets & Performance: Q4/2016 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 Due to delays in commercialization of NPD projects the Innovation sales target was slightly behind the 10% target. However, a record number of new products and new treatment concepts was launched in 2016 (14 versus 3 in 2015). Innovation sales target 10% was extended by one year until % 8% 6% 4% 2% 0% 5% 7% 8% 8% 9% 10% Target 2017 Responsibility in our supply chain Responsible manufacturing 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 CLIMATE CHANGE Carbon index Kemira Carbon Index 80 by end of 2020 (2012 = 100) KPI reported annually The new supplier audit process was initiated, with 4 onsite audits conducted by an external service provider. The carbon index 2 improved as a result of purchased electricity sourced from less carbonintensive sources. This improvement outweighed the negative effect of the sale of part of Kemira's holding in Pohjola Voima Oy, which entitled to nuclear power production capacity in Finland Target Target 2020 Investor Presentation - February

80 CORPORATE RESPONSIBILITY UPDATE 2/2 Targets & Performance: Q4/2016 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, 1 year rolling average) Achieve zero injuries (TRIF 2.0 by end of 2020) KPI reported quarterly Significantly improved safety performance due to our time and efforts invested on management commitment, employee engagement and higher visibility of safety related matters in our internal communication 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 Next Voices@Kemira survey is being planned for The amount of leadership development activities during 2016 was very high (494), and we are significantly ahead of our target of having 1500 development activities 4 during % 50% 0% 84% 70% 75% 58% 85% 67% Engagement Participation sustainability assessments have been performed for strategic, critical and large spend suppliers. 2 Carbon index value in 2015 was updated from 91 to 92 due to more accurate information from a few sites. 3 The cumulative amount of leadership development required to reach two (2) leadership development activities per people Investor manager Presentation position - during February equals 1500 leadership 80 activities (when number of people manager positions is ). 4 Development activities include job rotations, coaching and mentoring, and development programs Target 2020

81 Kemira largest shareholders and Board of Directors Shareholders on January 31, 2016 Kemira Board of Directors % of shares 1. Oras Invest 18.2% Jari Paasikivi, Chairman Member since 2012 Oras Invest Oy, CEO 2. Solidium (owned by State of Finland) 16.7% 3. Varma Mutual Pension Insurance Company 5.3% 4. Ilmarinen Mutual Pension Insurance Comp. 2.9% 5. Kemira Oyj 1.9% Kerttu Tuomas Vice Chairman Member since 2010 Wolfgang Büchele Member in and since 2014 Winnie Fok Member since 2011 Total number of shares 155,342,557 Foreign ownership of shares 25.7% Total number of shareholders 32,571 Kaisa Hietala Member since 2016 Juha Laaksonen Member since 2007 Timo Lappalainen Member since 2014 Investor Presentation - February

82 Kemira s Management Board Jari Rosendal President and CEO with Kemira since 2014 Petri Castrén CFO with Kemira since 2013 Kim Poulsen Pulp & Paper with Kemira since 2015 Antti Salminen Municipal & Industrial with Kemira since 2011 Tarjei Johansen Oil & Mining with Kemira since 2014 Heidi Fagerholm CTO with Kemira since 2010 Eeva Salonen Human Resources with Kemira since 2008 Esa-Matti Puputti Operational Excellence with Kemira since 2015 Investor Presentation - February

83 Important information about financial figures Kemira provides certain financial performance measures (alternative performance measures) on non-gaap basis. Kemira Group believes that alternative performance measures, like operative EBITDA and operative EBIT, followed by Kemira management, provide useful and more comparable information of its operative business performance. Kemira s alternative performance measures should not be viewed in isolation to the equivalent IFRS measures and alternative performance measures should be read in conjunction with the most directly comparable IFRS measures. Definitions of the alternative performance measures can be found in the Definitions of the key figures at Investors Financial information. Investor Presentation - February

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