Creating value where water meets chemistry

Transcription

1 Petri Castrén May, 2015 Kemira credit investor presentation Creating value where water meets chemistry

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 forward-looking 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. It is expected that each potential investor is acting for its own account, and it will make its own independent decisions to enter into any transaction and as to whether any transaction is appropriate or proper for it based upon its own judgment. The potential investor shall make its own evaluations, calculations, appraisal of the financial structure and financial outcome, credit analysis or any other evaluation (inter alia tax consideration) and the party shall make its own independent assessment of the terms and conditions of any proposed transaction. It is not relying on any communication (written or oral), information or explanation of Danske Bank, SEB and/or Kemira as an advice or as a recommendation to enter into any transaction. No communication (written or oral) received from any of Danske Bank, SEB and Kemira shall be deemed to be an assurance or guarantee as to the expected results of any transaction. The information may not be used or reproduced, in whole or in part, for any other purpose, nor be furnished nor distributed to any persons other than those to whom copies of this information package have been delivered by any of Danske Bank, SEB and Kemira. Further, the distribution of any information in this presentation, and the offer, sale and delivery of the securities described herein in certain jurisdictions may be restricted by law. There shall be no sale of these securities in any state or jurisdiction in which an offer, solicitation or sale would be unlawful prior to qualification under the securities laws of such state or jurisdiction. By electing to view this presentation, you represent and agree that you are not resident in the United States nor a US Person, as defined in Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), nor acting on behalf of a US Person and, to the extent you purchase the securities described in this presentation, you will be doing so pursuant to Regulation S under the Securities Act. 2

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

4 1. Our business

5 We help customers create more value by applying our expertise where water meets chemistry Kemira is a global chemicals company serving customers in water-intensive industries Focus Pulp & Paper Oil & Gas Mining Water treatment Revenue EUR 2.14 billion (2014) Employees 4,250 (2014) Revenue split by customer benefit Product quality or product yield optimization 50% Process and energy efficiency 20% Water quality and regulatory compliance in raw water and wastewater treatment 30% Kemira shares are listed on the NASDAQ OMX Helsinki stock exchange. 5

6 Business units in 40 countries and sales in more than 100 reach our customers around the world KEMIRA HQ Helsinki, Finland O&M management Houston, USA Regional HQ Atlanta, USA AMERICAS 39% EUR 850 million 1,480 Paper & M&I EMEA management Frankfurt, Germany EUROPE, MIDDLE EAST AND AFRICA 55% EUR 1,170 million 2,410 ASIA PACIFIC 6% EUR 120 million 350 Paper management Hong Kong Regional HQ Shanghai, China Employees R&D and technology centers 6

7 Key figures EUR million (except ratios) Revenue 2,137 2,229 2,241 2,207 2,161 EBITDA, excluding non-recurring items % of revenue Gearing, % at period-end Personnel at period-end 4,248 4,453 4,857 5,006 4,977 7

8 Our business is organized into customer-based segments SALES BY SEGMENT (2014) OIL & MINING OPERATIVE EBITDA BY SEGMENT (2014) PAPER 20 % 19 % 55 % 54 % 25 % 27 % MUNICIPAL & INDUSTRIAL 8

9 Kemira Management Board Jari Rosendal President & CEO Petri Castrén CFO Mats Rönnbäck Paper (Interim) Antti Salminen Municipal & Industrial Tarjei Johansen Oil & Mining Heidi Fagerholm CTO Eeva Salonen HR Michael Löffelmann Projects & Manufacturing Technology Esa-Matti Puputti Operational Excellence (as of May 18, 2015) 9

10 A leading global pulp and paper chemical supplier 45% 35% Packaging, board and tissue grades PAPER, Revenue 2014: EUR 1,170 million Operative EBITDA: EUR 137 million, 11.7% margin Expertise We have unique expertise in applying chemicals and supporting pulp & paper producers to innovate and constantly improve their operational efficiency and end-product quality. 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 Americas and APAC 10

11 Growing chemical supplier to Oil & Gas and Mining industries 20% Minerals & Metals applications OIL & MINING, Revenue 2014: EUR 382 million Operative EBITDA: EUR 48 million, 12.7% 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% Market position: #2 in emulsion and dry polyacrylamides Oil & Gas and process additives applications 11

12 Oil & Mining is a growing partner to the oil, gas and mining industry Kemira s revenue split in oil and gas applications Business is driven by cyclical oil, gas and metals prices Less than 50% of Oil & Mining revenue is related to shale operations Kemira is the world s second largest dry and emulsion polyacrylamide producer Market leader in friction reducers in the US for shale fracking Polymer technology is a growing trend in the shale operations 15% 75% 10% 0%

13 Market leader in raw and wastewater treatment chemicals Other MUNICIPAL & INDUSTRIAL, Revenue 2014: EUR 565 million Operative EBITDA: EUR 68 million, 12.1% margin Polymers 20% 15% 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 (67% of M&I revenue) #1 in North America (28% of M&I revenue) Re-entry into emerging markets once legislation comes into force 13

14 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.

15 Investing in growth Kemira s organic growth was 3% in 2014 (Paper 6%, Oil & Mining 15%) Pulp chemical deliveries to Montes del Plata (UY) AkzoNobel paper chemical acquisition* FennoBond capacity expansion (IT) 1/14 Nanjing (CN) process chemical site Tarragona (ES) coagulant site 5/14 BASF AKD emulsion acquisition 6/14 7/ Dry and emulsion polyacrylamide expansion (US) Q4/14 Telemaco Borba (BR) process chemical expansion Oulu (FI) pulp chemicals expansion * ) Transaction expected to close in Q Sodium Chlorate to Klabin (BR) Announced investments in

16 Shifting focus to fast growing differentiated products The share of differentiated products revenue increased to 49% (48% at the end of 2014) in Q1 2015, mainly due to increased sales volumes of sizing and strength chemicals in Paper Differentiated product line drivers: Commodity product line drivers: Application sales Production optimization Capacity expansion Capacity increases driving bleaching and pulping Market share driving coagulants Differentiated product lines Commodity product lines %-of total revenue in Q Polymers Sizing and strength Defoamers, dispersants, biocides and other process chemicals Coagulants Bleaching& Pulping chemicals Miscellaneous commodity products Paper 11% 24% 14% 4% 37% 10% Oil & Mining 58% - 25% 3% 7% 7% Municipal & Industrial 22% - 3% 65% 3% 7% Kemira 22% 14% 13% 20% 23% 8% 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 The AkzoNobel paper chemical acquisition will strengthen us especially in the growing Asian paper markets Strategic rationale Consolidating capacity Strengthening market position in all regions, especially in APAC Gaining new competencies and technologies Expected revenues of more than EUR 200 million on an annualized basis (at closing) Production sites Contract manufacturing Moses Lake Howard Chattanooga Kristinehamn Mannheim Ambes Estella Soave Oulu Gunsan Suzhou Wellgrow Closing expected in Q Transaction is expected to result in EUR 15 million annual net synergies Transaction price EUR 153 million Jundiai Pasuruan Hallam Mount Maunganui 18

19 Tight integration philosophy Kemira integration Immediate establishment of Kemira business processes, including IT systems (e.g SAP) Common business model Dedicated integration team 3F polymers Acquisition of a leading backward integrated polymer producer Full integration of Manufacturing sites to Kemira network Approximately 150 employees Sales, distribution, invoicing and other business processes into SAP Over 100% of expected synergies already realized Acquired business reached nearly 10% growth rate even during integration period BASF AKD emulsion business Bolt-on acquisition Strengthening our market position in Continental Europe through customer contracts Did not include sites, equipment or personnel Full integration of Sales, distribution, invoicing and other business processes into SAP Customer deliveries through Kemira s own manufacturing network 6 months after closing 19

20 CAPEX expected to increase due to ongoing investment projects in Paper Greenfield sodium chlorate project in Brazil in Integration of AkzoNobel paper chemical acquisition will require between EUR million capex between Careful review of polymer capacity expansion in oil & gas Capital expenditure, EUR million % 52% 57% 48% % 57% Sodium chlorate project in Brazil Expansion Maintenance and improvement 20

21 Innovating together with our customers to improve water, energy and raw material efficiency We are attentive to the current and longterm needs of our customers INNOVATION 250 R&D experts create new innovations in R&D centers in Finland, China and the USA 300 patent families and 1,300 patents R&D spend approximately EUR 30 million / year INNOVATION REVENUE TARGET IS 10% (2014: 8%) OF TOTAL REVENUE BY 2016 Achievements in 2014: New product launches: 8 Invention notifications: 107 Patents: 44 Publications: 111

22 Paper and Oil & Mining exceeded market growth, profitability improved in Municipal & Industrial Paper #1 Leverage strong market position Execute investment projects successfully Commercialize new products Continue to evaluate bolt-on acquisitions Revenue, EUR million 1,113 +5% 1, Oil & Mining #2* Invest in innovation and people and polymer technologies Strengthen & expand customer relationships Make selective acquisitions to broaden technological and business capabilities Revenue, EUR million % Municipal & Industrial #1 Leverage strong market position Maintain aggressive cost controls Operative EBITDA margin 12.1% 10.4% *In emulsion and dry polyacrylamides 22

23 3. Review of financials

24 Key figures and ratios EUR million (except ratios) Revenue 2,137 2,229 2,241 2,207 2,161 EBITDA, 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 Net debt

25 Key figures and ratios EUR million (except ratios) Q Q % 2014 Revenue ,137 Operative EBITDA of which margin Operative EBIT of which margin Share of profit or loss of associates Financing income and expense Earnings per share, EUR Capital expenditure, excluding M&A Cash flow from the operating activities Kemira Investor Presentation (updated on April 24, 2015) 25

26 Kemira operative ROCE trend Kemira operative ROCE* EUR million, expect ratios 2014* 2013* Revenue 2, ,229.1 Goodwill Other intangible assets ,2% 10,9% 10,8% 10,8% 10,7% 11,1% Property, plant and equipment Net Working Capital ratio 9.9% 10.9% 9,3% 9,7% Operative EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q *Rolling 12 months 26

27 Stable cash flow generation Foreign currency hedging settlements impacted cash flow in 2014 EUR million Net cash generated from operating activities Cash flow after investments 27

28 2015 outlook and mid-term financial targets In 2015, Kemira will focus on profitable growth organically and inorganically. Kemira expects its revenue in 2015 to increase compared to 2014 and operative EBITDA in 2015 to be approximately at the same level or increase compared to The outlook excludes the impact of AkzoNobel paper chemical business (acquisition expected to close in the second quarter of 2015). At closing, AkzoNobel paper chemical business is expected to add revenue of more than EUR 200 million on an annualized basis outlook 2017 target Revenue EUR 2.1 billion Increase EUR 2.7 billion Operative EBITDA EUR 253 million At the same level or increase Operative EBITDA margin 11.8% 15% Gearing 42% <60% 28

29 4. Key debt metrics

30 Profitability and strong balance sheet have been the main focus in the strategy implementation 2,1 2,0 2,1 2,1 1,9 1, Net debt/ operative EBITDA Net debt, EUR million Q

31 Kemira s aim mid term is to remain below gearing of 60% 60% 50% 40% 39% 38% 42% 41% 42% 49% 30% 20% Q

32 Debt portfolio EUR 687 million at the end of Q Loans from banks and financial institutions EUR 315 million 46% 12% 29% 3% 10% Bond EUR 200 million Commercial papers EUR 70 million Pension loans EUR 23 million Other EUR 79 million 32

33 Maturity profile Gross debt EUR 687 million, March 31, 2015 EUR million Gross debt EUR 649 million on the 30th of June Kemira Investor Presentation (updated on April 24, 2015) 33

34 Solid financial position with diversified debt portfolio Gearing (Net debt/equity) increased to 49% (42% at the end 2014) due to dividend payment, equals net debt/operative EBITDA* ratio of 2.1 Transaction price of the pending AkzoNobel paper chemicals business acquisition is approximately EUR 153 million EUR million undrawn committed facilities Capital structure, end of March, 2015 EUR million Cash and cash equivalents 126 EUR million 0 Net debt, 562 million 687 1,156 Assets Liabilities Equity Debt maturity profile, end of March, *) Rolling 12-month Kemira Interim Report Q

35 5. Potential bond transaction

36 Potential bond transaction Indicative terms and conditions Issuer: Kemira Oyj Status: Senior unsecured Amount: EUR [100] million Maturity: [ ] May 2022 Coupon: [ ] Documentation: Stand-alone, Finnish law Covenants/Terms: Change of Control, Cross Default, Negative Pledge Issuer call option Par call 3 months prior to the Redemption Date Clearing: Euroclear Finland (Infinity) Listing: Nasdaq OMX, Helsinki Denominations: EUR 100, ,000 Bookrunners: Danske Bank and SEB Kemira Oyj is contemplating a senior unsecured bond issue to extend debt maturity profile and to further diversify the funding sources The company is conducting a road show to present and discuss the potential transaction with fixed income investors Investor meetings in the Nordic countries will be held during May 4 6 The timing of the potential transaction will be thereafter, subject to market conditions The transaction size is expected at EUR 100 million and the maturity under discussion is 7 years 36

37 6. Appendix

38 Kemira s manufacturing footprint globally (59 sites) Polymers and other process chemicals (20) EMEA North America South America Coagulants (30) Bleaching and pulping (9) APAC 38

39 Oil price and its derivatives impacting logistics and raw material related costs Kemira variable cost structure in 2014 Logistics 20% 30% Oil direct + indirect (Acrylonitrile, acrylic acid, Alpha Olefins, Sodium Chloride) 15% Electricity used in production and as a raw material 35% Other raw materials and trading goods (caustic soda, fatty acid, aluminium hydrate, hydrochloric and sulphuric acid) 39

40 The impacts of the declined oil price most evident in Oil & Mining and Municipal & Industrial segments Kemira variable cost structure Logistics Electricity used in production and as a raw material 20% 15% 30% 35% Oil direct + indirect (Acrylonitrile, acrylic acid, Alpha Olefins, Sodium Chloride) Other raw materials and trading goods (caustic soda, fatty acid, aluminium hydrate, hydrochloric and sulphuric acid) Variable cost vs sales price trend Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Brent oil, USD Sales price* Variable costs* *) 12-month rolling change vs previous year Kemira Investor Presentation (updated on April 24, 2015) 40

41 Well balanced revenue and cost structure 10% appreciation of our main foreign currencies against EUR would approximately have EUR 15 million impact on operative EBITDA Kemira revenue distribution 2014 Kemira cost distribution 2014 USD 35% EUR 48% USD 34% EUR 43% Others 11% CAD 5% SEK 3% CNY 3% Others 8% CAD 2% SEK 4% CNY 4% 41

42 Paper January-March 2015 EUR million Q1/2015 Q1/2014 % % Revenue , , Operative EBITDA of which margin Operative EBIT of which margin Capital expenditure Cash flow Kemira Investor Presentation (updated on April 24, 2015) 42

43 Long-term commitment to the pulp and paper industry Kemira pulp and paper revenues have more than doubled since Kemira* (pulp and paper) #1 BASF (paper) #2 AkzoNobel (pulp) #3 Solenis (paper) #4 Ecolab (paper) # Ciba #1 AkzoNobel #2 BASF #3 Hercules #4 Kemira #5 Nalco #6 *Including AkzoNobel paper chemicals acquisition

44 Growth in pulp and paper chemicals is driven by higher volumes of packaging board and tissue grades Main growth drivers: Growing packaging board and tissue markets, especially in APAC Growing pulp production in South America and Northern Europe Increasing demand for paper chemicals for paper and board lightweighting and higher use of recycled fibres Pulp and paper chemical relevant market growth estimate, EUR billion (CAGR: 2.4%) APAC Americas EMEA 4.6% 1.9% 0.7% CAGR Source: Management estimation based on various sources 44

45 PAPER The paper industry benefits from our leading portfolio and unique expertise of the whole pulp & paper process INDUSTRIES Packaging and board Tissue Printing and writing Pulp PRODUCTS Sodium chlorate, Hydrogen peroxide, Polymers, Defoamers, Coagulants, Biocides, Sizing additives, Strength additives, Surface additives, Colorants,Sulfuric acid APPLICATIONS Pulping, Bleaching, Retention, Water quality management, Sizing, Strength, Surface treatment, Coloring, Deposit control, Microbiological growth control VALUE Improving process efficiency and quality Committed partner Innovating for customer needs Unique expertise covering the whole process from pulping to coating ADVANTAGE Application knowhow Complete portfolio Backward integration 45

46 Oil & Mining January-March 2015 EUR million Q1/2015 Q1/2015 % % Revenue Operative EBITDA of which margin Operative EBIT of which margin Capital expenditure Cash flow Kemira Investor Presentation (updated on April 24, 2015) 46

47 Growth driven by strong demand for oil and gas Our growth drivers: Global growth, especially in NA shale and in the Middle East Increased activity in Chemical Enhanced Oil Recovery (CEOR) and oil sands Entering into Production Chemicals Need for improved processing for declining ore grades Oil, gas and mining chemical market growth estimate, EUR billion (CAGR: 4%) EMEA Americas 4.8% 3.6% CAGR Source: Management estimation based on various sources 47

48 Uncertainty around US shale operations expected to continue US shale business represents less than 50% of Oil & Mining segment revenues Currently favorable U.S. dollar rate Increased sales and marketing as well as R&D focus in brownfield CEOR applications Horizontal rig count and oil price (WTI) index Horizontal rig count in US Oil price (WTI) 20 Jan Apr Jul Oct Jan Apr Jul Oct Jan Kemira Interim Report Q

49 OIL & MINING Strengthening market position across all product lines Oil & Gas Upstream EOR Stimulation Production Drilling & cementing Oil sands Mining Iron ore Copper Gold PRODUCTS Polymers, Dispersants & Antiscalants, Biocides, Emulsifiers, Defoamers, Coagulants 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 clarifiction and oil separation MINING APPLICATIONS Concentrate and tailings thickening, Rheology modification, Mineral slurry preservation, Scale control, Metal contaminant removal VALUE Improved: Process efficiency Yield Cost-efficiency Water efficiency Energy efficiency Compliance with environmental regulation ADVANTAGE Innovative chemicals & application knowledge Global polymer supply Kemira is 2 nd largest manufacturer of polyacrylamides in the world 49

50 Municipal & Industrial January-March 2015 EUR million Q1/2015 Q1/2014 % % Revenue Operative EBITDA of which margin Operative EBIT of which margin Capital expenditure Cash flow Kemira Investor Presentation (updated on April 24, 2015) 50

51 Regulation is driving the Municipal & Industrial market Key market characteristics Mature market in Europe and North America Regulatory driven Price and cost sensitive Local business Public and private customer base (60%/40%) Relevant Municipal and Industrial market* and growth estimate, EUR billion (CAGR: 2.6%) , , APAC North America EMEA 4.4% 2.4% 1.9% CAGR * Coagulants and Polymers in EMEA, Coagulants in North America and Polymers in APAC Source: Management estimation based on various sources 51

52 Municipal & Industrial segment delivering strong cashflow after restructuring and profitability improvement Leveraging leading market position Developing new solutions for raw and waste water management Focusing on cash flow maximization Polymers 20% Other 15% 65% Coagulants Revenue, EUR million 659 Operative EBITDA margin 12.1% %

53 MUNICIPAL & INDUSTRIAL Unique capabilities in water treatment chemicals INDUSTRIES Municipalities Private operators Industrial customers PRODUCTS Polymers (EPAM, DPAM, Polyamines, PolyDADMACs, Resin Amines), Al Coagulants, Fe Coagulants, Antiscalants, Defoamers APPLICATIONS Raw water treatment, Waste water treatment, Sludge treatment, Membrane care, Biogas yield enhancement, Disinfection of water streams VALUE Improved: Water treatment process efficiency Regulatory compliance ADVANTAGE Reliability, speed and logistics flexibility Deep application knowledge and comprehensive portfolio In mature markets, the only company that manufactures and supplies a comprehensive range of water treatment chemicals 53

54 Kemira s largest shareholders (March 31, 2015) Shareholders % of shares Oras Invest Oy 18.2% Solidium Oy 16.7% Varma Mutual Pension Insurance Company 5.3% Ilmarinen Mutual Pension Insurance Company 3.1% Kemira Oyj 2.1% Free float 54.6% Foreign shareholders share of free float 33% Households share of free float 30% Other share of free float 37% Kemira Investor Presentation (updated on April 24, 2015) 54

55 Shareholder Structure Institutional investors by investment style, 2015 Hedge Fund 1 % 7% 2% 22% 51% Index 8% Other 14% Growth 30% 8% 39% Value 17% GARP 30% 9% 3% 33% 36% 55% Kemira Investor Presentation (updated on April 24, 2015) 55

56 Shareholder structure (institutional investors) Geographical Distribution (%) Sweden 5% Norway 5% France 4% Rest of the world 3% Switzerland 2% UK 9% Finland 40% USA 17% Germany 8% Canada 7% Kemira Investor Presentation (updated on April 24, 2015) 56

57