Kemira January-December 2012: Year of change SRI roadshow, Paris, March 21, 2013

Transcription

1 Kemira January-December 2012: Year of change SRI roadshow, Paris, March 21, 2013

2 AGENDA Executive overview Sustainability Q Outlook

3 Satisfactory financial performance in 2012 Revenue EUR 2,240.9 million (2,207.2 in 2011), +2% - Revenue in emerging markets grew 9%, driven by Paper in APAC region Operative EBIT EUR million (157.3), -2% - Operative EBIT margin 6.9% (7.1%) - Fit for Growth launched in July 2012, to reach 10% EBIT margin in 2014 Operative earnings per share EUR 0.77 (0.89) - Lower income from associated companies had EUR 0.13 negative impact Board of Directors proposes EUR 0.53 dividend (0.53), 69% payout ratio (60%) Cash flow after investing activities EUR 71.8 million (115.3) 3

4 Significant structural change ongoing New organization in operation since October, Accelerating growth, reducing complexity - New performance management system introduced to focus the whole organization on value creation Personnel reduction - Up to 600 employees, 12% of the total workforce - Most of the co-determination negotiations have been accomplished Manufacturing network optimization - Almost 20% of all production sites either decided to be closed or under review Leaner operation - NWC* ratio target is 11% in 2014 (12.8% in 2012) Sharpened strategy will be presented in April, 2013 *Net working capital 4

5 Fit for Growth launched to improve profitability Product mix optimization and growth driving profitability improvement in Paper and in Oil & Mining Implemented cost savings and efficiency improvements will boost margins in Municipal & Industrial and ChemSolutions Kemira operative EBIT margin trend by segments 5

6 Municipal & Industrial - Fit for Growth to drive profitability turnaround Manufacturing network optimization reduces cost volatility Cost savings through site closures, M&I operates at 40 sites (over 20% of the sites decided to be closed, sold or under review) Customer segmentation improves efficiency Q negatively impacted by higher maintenance costs, Q by clearance of inventory of low-margin products Municipal & Industrial segment revenue split and operative EBIT margin EUR million Industrial Municipal 6

7 Municipal & Industrial is currently optimizing the production footprint for inorganic coagulants New site investments in Tarragona & Dormagen will yield quick returns thanks to improved network optimization. Fixed costs will be reduced by 40% and raw material costs are expected to decline by 20% in the specific market region Coagulant production footprint optimization in order to increase profitability Raw material* costs + Fixed costs of plants + Freights to customers Minimize Access to raw materials Best use of available cheap raw materials Reduced cost of footprint Close plants to reduce overcapacity in network Delivery to customers High freights require plants to be close to customer clusters *Copperas, magnetite, scrap iron, spent pickling liquor, liquid chlorine, sulphuric acid, hydrochloric acid 7

8 ChemSolutions - Fit for Growth will improve profitability Raw material prices and maintenance shutdown impacted profitability in 2012 Fit for Growth to return profitability above 10% EBIT margin by 2014 Focus on formic acid and related derivatives Maximize output of Kemira s formic acid plant in Oulu ChemSolutions revenue* split and operative EBIT margin EUR million *Divestment of food and pharmaceutical businesses will have approximately EUR 50 million impact on revenue in

9 Kemira target is to reduce 50% of the total # of SKU s* SKU reduction as part of the focus on lean operation will lead to significant cost savings In ChemSolutions Oulu formic acid plant 70% SKU reduction was identified leading to EUR 2 million annual EBIT improvement SKU reduction in Oulu accomplished by merging trade names and deleting small SKUs Oulu Kemira SKU reduction target ChemSolutions portfolio -70% reduction SKU reduction target # of SKU s in 2014 Current # of SKU s # of SKU s in 2014 *Stock-keeping units 9

10 Paper Packaging and board driving growth Over 5% market growth* in APAC (Packaging and Board) and SA (Pulp) Newsprint share of Paper segment revenue less than 4% Tissue and fiber based packaging markets are expected to grow over 4%* Trend towards recycled fiber and lighter paper qualities will increase the chemicals consumption Paper segment revenue split and operative EBIT margin EUR million 24% 31% Tissues and specialties Packaging and board Printing and writing Pulp *Expected market growth

11 Understanding customers needs is a key competitive advantage Kemira s Fennobond enables yield advantage resulting in 5%-10 % lighter* end customer product Chemicals helps customers to optimize their raw material use e.g fiber consumption Customers process efficiency improves by using right chemistry 10,000 miles later *Source: MetsäBoard 11

12 Oil & Mining Good base for growth Atlanta R&D center ensuring continuous competence development 60% polymer capacity expansion finalized at the end of 2012 Small acquisitions targeted to gain stronger market position Portfolio rebalancing by exiting low-margin product sales to be finalized by the end of 2013 (approximately EUR 10 million negative impact in 2013) Oil & Mining segment revenue and operative EBIT margin EUR million 12

13 Revenue growth generated through new innovative solutions New product and application sales* generated EUR 106 million in 2012 (40 in 2011) - New products and product applications on average generate 15% higher gross margin - Most of the new sales in 2012 from oil and gas, as well as tissue customer segments Kemira spends roughly 2% of its revenue on R&D *New product and application sales = products and applications launched within the past 5 years 13

14 Executive overview Sustainability Q Outlook

15 Monitoring, control and dosing support 15

16 Kemira sustainability targets Suppliers Sustainability targets Effective use of Code of Conduct for Suppliers, Distributors and Agents (CoC-SDA) in all relevant supplier relationships by the end of 2013 Active Supplier Performance management program in place by the end of 2013 KPI for performance measurement Supplier contracts with signed CoC-SDA for Business Partners as attachment Average performance of core suppliers (75% of spend), performance rate % Share of reviewed suppliers under certain performance level with agreed corrective actions, % Number of supplier audits per year Status at year-end 2012 CoC-SDA approved by the Management Board in Q4 2012, and implementation started immediately Suppliers performance criteria and expectations defined Quarterly follow-up of supplier performance started in Q The average performance rate of the core suppliers was 95.5% The share of suppliers at performance rate below 80% was 14.3%. Review, track and corrective actions are planned with those suppliers which count for 50% of the total low performing suppliers spend/volume 16

17 Kemira sustainability targets Operations Sustainability targets Occupational health and safety: Achieve zero accidents Water efficiency: Baseline analyzed and water efficiency program defined by the end of 2014 Energy efficiency: Baseline set and the energy efficiency index defined by the end of 2013 KPI for performance measurement TRI employees and contractors To be defined by the end of 2014 To be defined by the end of 2013 Status at year-end 2012 TRI (Total Recordable Indicents) = 8.5 Project to assess water efficiency opportunities and development of water management program to be started in 2013 In 2012, 7 site audits and about 50 follow-up audits were conducted. This resulted 159 identified new improvement cases. During 2012, 136 improvement cases were implemented Total savings achieved 2,100 k Cumulative since 2010: 26 sites audited representing 92% of total energy consumption, 825 potential improvement cases identified of which 317 cases implemented. Total savings achieved 5,800 k 17

18 Kemira sustainability targets Employees Sustainability targets Ethical behavior: All Kemira employees covered by Code of Conduct training by the end of 2013 Performance management: All Kemira employees covered by the global Performance Management process by the end of 2014 Leadership development: Every people manager participates in leadership development programs at least once every 3 years, first target period KPI for performance measurement Kemira employees completed Kemira CoC training, % Kemira employees covered by the global Performance Management process, % People managers covered by global leadership programs, % Status at year-end 2012 Updated Kemira Code of Conduct was approved by the Board of Directors in Q Kemira Code of Conduct is part of the employee induction process and documentation 55% of the employees covered the global Performance Management process Leadership development focus has been on change management 20 % of people managers participated in leadership training 18

19 Kemira sustainability targets Customers Sustainability targets Sustainability and safety aspects considered in all New product Development (NPD) projects by the end of 2014 KPI for performance measurement All new projects apply the sustainability check in Gate 1, % Existing projects apply the sustainability check in Gates 2 4 Status at year-end 2012 Sustainability and safety criteria defined, and sustainability check template included in project s gate material 19

20 Kemira sustainability targets Local communities* Sustainability targets Each Kemira site with over 50 employees has participated in local community involvement initiatives at least once by the end of 2015 KPI for performance measurement Kemira sites with local community initiatives, % Status at year-end % of targeted sites with community involvement activities 37 sites participated in community involvement activities, of which 11 sites with over 50 employees * Local community involvement includes actions such as e.g. open days for the surrounding communities, collaboration with environmental and city councils, schools, universities and research institutes, donations to local charities and community service associations, as well as sponsoring of local sports and cultural activities. 20

21 Examples of Kemira environmental performance improvement We have successfully reduced the emissions of our production by over 60% over the past 15 years. The cumulative savings of our E3 energy efficiency program since implemented in 2010 are so far MWh calculated at an annual level. 21

22 Kemira - The best performer among water stocks in 2010 Kemira was for the first time included in a global water index in 2010, after painting and coating business (Tikkurila) spin-off Kemira foreign ownership has increased 80% since the 2010 spin-off (foreign ownership today is approximately 35% of the free-float) Approximately 50% of the new foreign shareholders are either big water funds or SRI** funds About 80% of Kemira revenue in 2012 was water related *Includes Kemira s water quality and quantity management related process chemicals and water treatment chemicals businesses. Some pulp related chemicals (bleaching) and ChemSolutions are excluded **Socially Responsible Investor 22

23 Sustainability creating value for Kemira s key stakeholders Shareholders Returning investment Transparency Reduced risk Operational effectiveness Sustainability related growth opportunities Customers Employees Operational effectiveness (TCO) Reliable business partner Sustainable, innovative portfolio of products and services Brand value & reputation Employer of choice Employee safety, well-being & health Responsible labor management Personnel development 23

24 Sustainability perceived differently by different shareholders Shareholder type: Short-term investors: quick wins Mid-term shareholders: risk management Responsible shareholders: long-term growth Sustainability related risks: Governance systems and compliance processes Economic risks Environmental risks People and Society related risks ( ) Sustainability related opportunities: Megatrends Tightening environmental regulations Energy & Climate change Water scarcity ( ) 24

25 How is responsibility assessed and reflected in shareholder decision making Assessment: Influence 3 main categories of investors: Multiple number of different commercial and noncommercial sustainability / ethical / SRI raters, ratings and indices available No generally accepted common framework or guidance exists Most commonly referred: CDP, DJSI, FST4Good index Investment decision dependent on sustainability Interested in sustainability, but less influence on decision making No interest in sustainability 25

26 Kemira activity in selected external sustainability related initiatives GRI (Applicatio n Level) Dow Jones Sustainabili ty Indices UN Global Compact CDP (Disclosure Score) CDP (Performan ce Band) WBCSD Kemira (B+) (72) (C) GRI = Global Reporting Initiative Global Compact = United Nations strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption. CDP = Carbon Disclosure Project WBCSD = World Business Council for Sustainable Development 26

27 Sustainability matters for Kemira In 2012, Kemira defined its sustainability priorities and sustainability targets, which will be published in the Kemira Annual report Sustainability aspects are incorporated into new product development (NPD) projects. Due to the overall nature of our business we are helping our customers to improve their energy, water and raw material efficiency. 27

28 Executive overview Sustainability Q Outlook

29 Kemira financial highlights Q Revenue increased 3% to EUR million (543.3) - Sales volumes increased in Paper and Municipal & Industrial segments Fixed costs increased EUR 7 million despite Fit for Growth savings Operative EPS decreased due to EUR -5.7 million loss from JV Sachtleben Cash flow after financing activities was positive as a result of net working capital reduction Some 40% of the employees already made redundant are still on the payroll EUR million Oct-Dec 2012 Oct-Dec 2011 % Jan-Dec 2012 Jan-Dec 2011 Revenue , , Operative EBIT Operative EBIT, % Income from associated companies Financial income and expenses Operative EPS, EUR Cash flow after financing activities Number of personnel 4,857 5, ,857 5,006-3 % 29

30 Kemira Group revenue growth trend Q sales prices slightly higher year-on-year - Paper, Oil & Mining and ChemSolutions increased sales prices Q sales volumes grew vs Q due to recovered demand in Paper and M&I Reported revenue has been supported by favorable currency exchange in

31 Good balance between sales and raw material prices Largest product categories (accounting for ~55% of Kemira s revenue) and most relevant businesses: - Polymers: Oil & Mining, Paper wet-end and industrial customer segment - Electrolysis products: pulp customer segment - Coagulants: municipal customer segment Kemira sales prices vs variable costs *12-month rolling change vs previous year, meur, excl. Tikkurila and Pigments 31

32 Kemira operative EBIT Q vs Q Positive effect derived from higher sales volumes and sales prices was offset by higher variable and fixed costs 32

33 Kemira fixed costs in Q vs Q Fixed costs increased EUR 7 million in Q vs Q Exceptional high pension credits of EUR 4 million 2011 combined with higher headcount (mainly APAC,SA) EUR 2 million and cost inflation in wages and salaries EUR 3 million was partly compensated by Fit for Growth savings. EUR million

34 Kemira fixed costs 2012 vs 2011 Fixed costs increased EUR 15 million in 2012 H fixed costs were EUR 13 million higher due to higher maintenance and personnel expenses H fixed costs EUR 2 million higher despite Fit for Growth cost savings EUR million specific fixed cost increase EUR 10 million (non-repeatable)

35 Paper EUR 1 billion revenue and improved profitability in 2012 Revenue increased by 7% vs. Q4/2011 Reported revenue grew in all sub-segments Recovered demand in pulp, increased sales prices to printing and writing Currency exchange +2% Divestments -1% Operative EBIT in Q increased 46% to EUR 20.8 million (14.2) Organic revenue growth Efficiency improvements and Fit for Growth Operative EBIT margin improved to 8.3% (6.1%) Cash flow decreased mainly due to higher capex Q was positively impacted by hydrogen peroxide divestment in Canada (EUR million) Q4/12 Q4/11 % % Revenue , Operative EBIT Operative EBIT, % Cash flow* *After investing activities, excluding interest and taxes 35

36 Municipal & Industrial sales volumes recovered in 2012 Revenue in Q increased 5% to EUR million (166.6) Sales volumes recovered and were higher than in Q Sales prices unchanged Operative EBIT EUR 7.2 million (9.0) in Q Higher sales volumes Higher variable and fixed costs Gross margin was negatively impacted by the reduction of low margin product inventories Operative EBIT margin decreased to 4.1% (5.4%) Positive cash flow (EUR million) Q4/12 Q4/11 % % Revenue Operative EBIT Operative EBIT, % Cash flow* *After investing activities, excluding interest and taxes 36

37 Oil & Mining Improved product mix and profitability in 2012 Revenue in Q decreased 10% to EUR 72.1 million (80.0) -4% impact related to exited low margin products (impact will be fully accomplished at the end of 2013) +1% currency exchange Pressure on sales volumes due to temporary market softness in the Oil and Gas sub-segment in North America and in the global mining globally Operative EBIT decreased to EUR 5.8 million (8.5) in Q Lower sales volumes Higher fixed costs due to increased sales and marketing activities Operative EBIT margin was 8.0% (10.6%) (EUR million) Q4/12 Q4/11 % % Revenue Operative EBIT Operative EBIT, % Cash flow* *After investing activities, excluding interest and taxes 37

38 Other (ChemSolutions and Group expenses) ChemSolutions revenue in Q was stable at EUR 49.8 million (49.1) Slightly higher sales prices ChemSolutions Operative EBIT was EUR 5.2 million (5.3) in Q Higher sales prices Operative EBIT margin was 10.4% (10.8%) Group expenses were EUR 3 million higher compared to Q (EUR million) Q4/12 Q4/11 % % Revenue* of which ChemSolutions Operative EBIT of which ChemSolutions As of January 1, 2013, ChemSolutions will be reported as a separate segment together with Paper, Municipal & Industrial and Oil & Mining. Revenue other than ChemSolutions and all Group expenses will be allocated to these four segments on a fixed quota basis, and the unit called Other will be abolished. Restated figures will be publicly available before the first quarter result release on April 23, *Including eliminations 38

39 EBIT 10% margin achieved through Fit for Growth restructuring by 2014 Fit for Growth cost savings impact was EUR 10 million in 2012 (EUR 7 million in Q4 2012) EUR 60 million cost savings 1. Redundancies and leaner organization will contribute 50% to the savings 2. Manufacturing network consolidation: 35% 3. Leaner operation: 15% Reported between Q Q2 2013: Restructuring charges of EUR 85 million EUR 45 million cash cost, mainly for severance payments, EUR 41 million in 2012 EUR 40 million, asset write-downs, EUR 30 million in

40 Executive overview Sustainability Q Outlook

41 Kemira s business model can cope with changes in its business environment More than 75% of Kemira s revenue has limited exposure to economic cycles - Most exposed are oil and gas in the US as well as pulp business Efficiency improvements carried out to compensate for annual cost inflation - Kemira fixed costs are about 25% of the revenues Oil price has limited direct impact on Kemira s raw material spend Oil dependency (share of raw material spend) Indirectly dependent via feedstock Kemira operating expenses EUR million Electricity Oil dependent Independent 41

42 Operative EBIT will be significantly higher in 2013 Outlook for 2013 Revenue in local currencies and excluding divestments expected to increase 0%-5% in 2013 compared to Jan-Dec 2012 revenue: EUR 2,240.9 million Operative EBIT expected to increase more than 15% in 2013 compared to Jan-Dec 2012 operative EBIT: EUR million 42

43 APPENDIX

44 Creating shareholder value Substantial earnings improvement potential Fit for Growth program New organization fosters growth in high margin businesses Strict cash flow management Organic growth Leverage mature markets with existing strengths Well established position in US Oil and Gas markets Packaging and Board driving growth in Asia Strong balance sheet Good funding position Relevant financial assets Smaller M&A possible also short term, if criteria are all met Strong focus on shareholder returns 40% - 60% dividend payout policy (based on operative net profit) 44

45 Consolidating our manufacturing network, 71 sites Site categorization started to enable consolidation of the manufacturing network - 8 sites and 2 production plants decided to be closed or sold by the end of H1 of 2013* - We have announced a project aiming to close 2 sites in France and have started the related co-determination negotiations - Another 2 sites under review Europe North America Germany Spain South America Asia Pacific Coagulants Polymers Common process chemicals and Paper wet-end chemicals Bleaching chemicals New production sites under construction India Nanjing Sites decided to be closed or sold * Sevilla, Tarragona old, Flix, Kvarntorp, Houston, Savannah, St Petersburg, Camaçari, Europoort (M&I), Xoxtla (M&I) 45

46 Fit for Growth will improve EBIT by EUR 60 million in 2014 Cost savings impact in operative EBIT 2012 was EUR 10 million EUR 5 million impacted variable costs EUR 5 million impacted fixed costs Expected cost savings impact in operative EBIT 2013 is EUR 50 million Expected cost savings impact in operative EBIT 2014 EUR 60 million EUR million Expected savings Realized savings 46

47 Fit for Growth requires EUR 85 million in restructuring costs EUR 71 million booked in 2012 and EUR 14 million in H In 2012, restructuring charges amounted to EUR 71 million, of which EUR 41 million related to severance payments and external services and EUR 30 million to asset write-downs Total non-recurring severance payments and external services approximately EUR 45 million Total non-recurring asset write-downs approximately EUR 40 million EUR million Expected restructuring charges Realized restructuring charges

48 Risk of the slowdown of the economy has a different impact in Mature markets vs. Emerging markets Principle: Revenues impacted in case of slowdown in the economy; high correlation (1), medium (0.5) and low (0) Higher correlation with slowdown of economy (28%) clearly on Matured markets; mainly in Oil & Gas and Pulp business portfolio 25% of our global business has a high correlation with the impact of slowdown of economy Mature market revenue (EUR 1.9 billion sensitivity*) Emerging market revenue (EUR 0.3 billion sensitivity*) 19% Low 54% High 28% Medium *Sensitivity based on management estimate 48

49 Kemira fixed costs are approximately 25% of revenues Fixed costs includes personnel expenses, maintenance cost and leases Expected Fit for Growth savings EUR 50 million in 2013 Efficiency improvements and operating leverage compensating the annual cost inflation of around 3% TOP 10* raw materials account for 45% of raw material spend EUR million Kemira operating expenses *From 1 to 10: Acrylic Acid, Cationic monomer, Acrylonitrile, Fatty acid, Petroleum solvents, Propionic acid, Aluminium Hydrate, Sodium hydroxide, Sulphuric acid, Hydrochloric acid 49

50 Kemira key ratios Inventories were reduced by EUR 46 million during 2012 Operative ROCE, %, excludes EUR 122 million non-recurring charges in 2012 Net debt impacted by dividend payment of EUR 81 in March 2102 EUR million, except key ratios and personnel Dec, Dec, Capital employed* 1,673 1,705 Operative ROCE, %* 10% 10% Equity ratio, % at period-end 53% 51% Gearing, % at period-end 40% 38% Net debt * 12-month rolling average 50

51 Kemira cash flow statement EUR million Q Q % YTD 2012 YTD 2011 Operative EBITDA Change in net working capital Cash flow from operations Capital expenditure Other investing activities Cash flow after investing activities % 51