(Stock Exchange Release) - Revenue: EUR 673.3 million (Q1/2006: 552.9 million), up 22%. - Operating profit: EUR 48.9 million (45.5 million), up 7% (up 18%, when excluding the effect of non-recurring items). - Earnings per share: EUR 0.22 (0.21), up 5% - Full-year revenue, operating profit and earnings per share are expected to improve from their 2006 levels. KEY FIGURES AND RATIOS EUR million 1-3/2007 1-3/2006 Change % 1-12/2006** REVENUE 673.3 552.9 22% 2,522.5 EBITDA 82.6 74.9 10% 317.2 EBITDA, % 12.3% 13.5% 12.6% OPERATING PROFIT 48.9 45.5 7% 193.7 Operating profit, % 7.3 % 8.2 % 7.7% Financial income and expenses -12.2 -7.1 -37.2 PROFIT BEFORE TAX 37.3 37.5 -1% 154.2 Profit before tax, % 5.5 % 6.8 % 6.1% NET PROFIT 27.3 26.6 3% 112.2 EPS, EUR 0.22 0.21 5% 0.90 Capital employed * 1,924.6 1,805.5 1,876.6 ROCE, % * 10.2 % 9.9 % 10.2% Cash flow after investments, -117,6 -41.5 155.0 excluding acquisitions * 12-month rolling average ** Prior year correction included (see page 6) Kemira Group's revenue for January-March 2007 rose by 22% year on year, to EUR 673.3 million (Q1/2006: 552.9 million). Acquisitions contributed around EUR 129.7 million to revenue growth. Divestments depressed revenue by roughly EUR 9.0 million. Organic growth was 2%, excluding the currency effect, which had a 2% negative impact on revenue. Operating profit grew by 7%, to EUR 48.9 million (45.5), with acquisitions contributing approximately EUR 4.7 million to the figure. Operating profit includes capital gains on the sale of assets and other non-recurring items, with their net effect on operating profit amounting to EUR 0.8 million, compared with EUR 4.9 million reported a year ago. Excluding the effect of non-recurring items, operating profit totaled EUR 48.1 million (40.6), or an increase of 18%, year on year. Non-recurring items included in operating profit: +-----------------------------------------------------------------+ | EUR million | 1-3/2007 | 1-3/2006 | 1-12/2006 | |-------------------------------+----------+----------+-----------| | Kemira Pulp&Paper | 1.3 | 4.1 | 11.0 | |-------------------------------+----------+----------+-----------| | Kemira Water | - | - | -0.2 | |-------------------------------+----------+----------+-----------| | Kemira Specialty | - | - | 3.6 | |-------------------------------+----------+----------+-----------| | Kemira Coatings | - | - | 16.4 | |-------------------------------+----------+----------+-----------| | Other, including eliminations | -0.5 | 0.8 | -7.6 | |-------------------------------+----------+----------+-----------| | Total | 0.8 | 4.9 | 23.2 | +-----------------------------------------------------------------+ Profit before tax came to EUR 37.3 million (37.5) and net profit totaled EUR 27.3 million (26.6). RESEARCH AND DEVELOPMENT Reported research and development expenditure totaled EUR 15.2 million (11.9), accounting for 2.3% of revenue (2.0%). CAPITAL EXPENDITURE Gross capital expenditure, excluding acquisitions, amounted to EUR 55.1 million (27.2). The largest ongoing investments involve a chemical plant under construction at the site of the Botnia pulp mill in Uruguay, EUR 12.0 million, and a paint factory under construction in the Stockholm area, EUR 5.9 million. Maintenance investments represented around 26% of capital expenditure excluding acquisitions. Group depreciation came to EUR 33.7 million (29.4 million). Gross capital expenditure, including acquisitions worth EUR 23.2 million (30.3), totaled EUR 78.3 million (57.5). FINANCIAL POSITION AND CASH FLOWS In January-March, the Group reported a negative cash flows of EUR 30.0 million from operating activities (negative cash flow of EUR 20.3 million), due mainly to seasonal fluctuations in working capital. The Group generated negative net cash flows of EUR 110.8 million from investing activities, of which acquisitions accounted for an outflow of EUR 23.2 million. Kemira showed a negative free cash flow of EUR 140.8 million (-71.8). On March 31, 2007, the Group's net liabilities stood at EUR 964.5 million (December 31, 2006: EUR 827.4 million), this growth being primarily due to a seasonal increase in working capital and acquisitions carried out during the period. On the same date, interest-bearing liabilities stood at EUR 1021.3 million. The duration of the Group's interest-bearing loan portfolio at the period-end was 15 months. On March 31, 2007, the equity ratio stood at 39% (March 31, 2006: 42%; December 31, 2006: 39%). while gearing was 87% (March 31, 2006: 65%; December 31, 2006: 76%). Net financial expenses increased to EUR 12.2 million (7.1), due mainly to higher interest bearing debt and also the rise in interest rates. Cash and cash equivalents on March 31, 2007 totaled EUR 56.6 million (March 31, 2006: EUR 108,0 million). In October 2006, Kemira signed a credit facility worth EUR 80 million, enabling six Group companies to sell certain account receivables to the finance company. The related credit risk transfers to the finance company and the receivables are derecognized from the Group companies' balance sheet. The amount of outstanding sold receivables on March 31, 2007 was EUR 15.8 million (December 31, 2006: EUR 15.7 million). HUMAN RESOURCES The number of Group employees totaled 9,405 on March 31, 2007 (March 31, 2006: 8734; December 31, 2006: 9,327). KEMIRA PULP&PAPER Kemira Pulp&Paper is the world's leading supplier of pulp and paper chemicals, its extensive solutions spanning the pulp and paper industry's value chain from pulp to paper coating. EUR million 1-3/2007 1-3/2006 Change % 1-12/2006 REVENUE 255.3 209.5 22% 993.3 EBITDA 35.5 37.0 -4% 137.1 EBITDA, % 13.9% 17.7% 13.8% OPERATING PROFIT 23.0 26.0 -12% 90.8 Operating profit, % 9.0% 12.4% 9.1% Capital employed * 819.7 793.1 819.5 ROCE, % * 10.7% 9.5% 11.0% Capital expenditure, excluding 22.3 14.6 77.6 acquisitions Cash flow after investments, -7.7 5.6 65.1 excluding acquisitions Personnel at period-end 2,286 2,058 2,304 * 12-month rolling average Kemira Pulp&Paper reported year-on-year revenue growth of 22%, totaling EUR 255.3 million (209.5), due largely to the acquisition of the Lanxess paper chemicals business in April 2006. Organic revenue growth was 4%, excluding the currency effect, which had a 3% negative impact on revenue. The early arrival of spring in Finland made it more difficult for customers to purchase timber causing some downtime, that was reflected in bleaching chemicals' weaker sales volume performance. The business area was able to fully pass raw material price increases, which were more modest than a year ago, on to end product prices to their full extent. Reported operating profit of EUR 23.0 million (26.0) included EUR 1.3 million (4.1) in non-recurring income. The Lanxess paper chemicals business was included for the first time in the first-quarter figures; this contributed to the decreased ratio of operating profit to revenue. Operating profit was lowered by the Korean hydrogen peroxide business, divested in 2006. The integration of Lanxess continues to make good progress. KEMIRA WATER Kemira Water is the world's leading supplier of inorganic coagulants and ranks third in water treatment polymers. Kemira Water offers customized water treatment and sludge treatment solutions to municipal and private water treatment plants and industry. EUR million 1-3/2007 1-3/2006 Change % 1-12/2006 REVENUE 170.0 92.3 84% 467.6 EBITDA 18.8 10.4 81% 53.4 EBITDA, % 11.1% 11.3% 11.4% OPERATING PROFIT 11.9 6.4 86% 35.3 Operating profit, % 7.0% 6.9% 7.5% Capital employed * 320.4 223.7 269.2 ROCE, % * 13.0% 13.6% 13.4% Capital expenditure, excluding 7.7 2.8 19.4 acquisitions Cash flow after investments, -10.5 -2.1 26.7 excluding acquisitions Personnel at period-end 2,057 1,545 1,846 * 12-month rolling average Kemira Water's revenue improved by 84%, to EUR 170.0 million (92.3), due particularly to the acquisition in October 2006 of Cytec, Galvatek and Parcon. Organic growth stood at 7%, excluding the currency effect, which had a 5% negative impact on revenue. Operating profit grew by 86%, to EUR 11.9 million (6.4), due to company acquisitions in particular. January saw the confirmation of the second stage included in the acquisition of the Cytec water treatment chemicals and acrylamide business. The first stage in October 2006 involved the confirmation of the Cytec water treatment chemicals business transfer to Kemira, excluding the Botlek production plant in the Netherlands and the assets of subsidiaries based in Latin America and Asia-Pacific. Thereafter, the second stage involved the confirmation of the Botlek production plant's transfer to Kemira and assets in Latin America and Asia-Pacific are expected to transfer to Kemira during the second quarter of 2007. The purchase price will total roughly EUR 197 million, including the price related to the deal's second and final stage and costs related to the acquisition. In January, Kemira agreed to acquire two Dalquim Industria e Comercio Ltda companies in Brasil. With combined revenue of around EUR 12 million, these companies manufacture inorganic water-treatment coagulants and their main customers include the paper industry and municipalities. In addition to serving the paper industry's growing needs, the acquirees focus on the treatment of municipal drinking and wastewater. Bolstering Kemira's goal of intensifying mutual synergy and strengthening its position as the world's leading supplier of pulp, paper and water treatment chemicals in the emerging market, this acquisition was completed in April. In March, Kemira agreed to acquire Arkema's coagulants business for water treatment. In 2006, the acquired business reported revenue of around EUR 19 million. As a result of the acquisition, Kemira will become the market leader for inorganic coagulants in France and fortifies its leading position in the Spanish market. In April, Kemira confirmed the acquisition of 80% of the shares in the Chinese company Chongqing Lanjie Tap Water Materials Co.,Ltd.. The company is a producer of inorganic coagulants and organic polymers for water treatment in the municipality of Chongqing, located in central China. Its main client base is in the local potable water production. The company's current revenue, in the range of EUR two million annually, is expected to grow rapidly in the years to come. KEMIRA SPECIALTY Kemira Specialty is the leading supplier of specialty chemicals in selected customer segments, serving customers in a wide array of industries, such as the cosmetics, printing ink, food, feed and detergent industries, through its customer-driven solutions. EUR million 1-3/2007 1-3/2006 Change % 1-12/2006 REVENUE 103.5 118.6 -13% 456.2 EBITDA 18.1 19.1 -5% 77.0 EBITDA, % 17.5% 16.1% 16.9% OPERATING PROFIT 10.3 11.3 -9% 45.8 Operating profit, % 9.9% 9.5% 10.0% Capital employed * 446.4 457.8 451.6 ROCE, % * 10.0% 10.5% 10.1% Capital expenditure, excluding 9.5 4.8 30.8 acquisitions Cash flow after investments, -7.6 15.3 53.6 excluding acquisitions Personnel at period-end 1,004 1,137 1,011 * 12-month rolling average Kemira Specialty's revenue decreased by 13%, to EUR 103.5 million (118.6). Due to developments in the US housing market and dollar, competition toughened in Europe in particular and titanium dioxide sales volumes decreased during January-March. The euro selling prices of titanium dioxide fell slightly. In addition, sales of deicer chemicals were at low levels as a result of the warmer-than-usual winter in Europe. Currency effect lowered the sales by 3%. Operating profit was EUR 10.3 million (11.3), due chiefly to lower sales volumes and selling prices of titanium dioxide. Year on year, operating profit as a percentage of revenue improved to 9.9% (9.5%). In March. Kemira acquired Sustainable Nutrition BV of the Netherlands from the company's management. Kemira and the acquiree have collaborated in previous years when Sustainable Nutrition has operated as Kemira's sales, marketing and product development partner in the feed industry. The acquisition will strengthen Kemira's customer knowledge in the feed industry. In April, Kemira agreed to acquire TRI-K Industries Inc., including its subsidiary Maybrook Inc., from the company's management. The company is headquartered in New Jersey and has additional operations in Massachusetts. With a staff of 50 and revenue of around USD 20 million in 2006, TRI-K Industries Inc. is a distributor and producer of specialty ingredients for the cosmetics industry. This acquisition will provide Kemira Specialty with an excellent platform for expanding its cosmetics business, especially in the field of skin care and hair care. KEMIRA COATINGS Kemira Coatings is the leading supplier of paints in Northern and Eastern Europe, providing consumers and professionals with branded products. Its products consist of decorative paints and coatings for the woodworking and metal industries. EUR million 1-3/2007 1-3/2006 Change % 1-12/2006 REVENUE 135.8 118.6 15% 562.8 EBITDA 17.1 13.7 25% 88.9 EBITDA, % 12.6% 11.6% 15.8% OPERATING PROFIT 12.8 9.6 33% 72.1 Operating profit, % 9.4% 8.1% 12.8% Capital employed * 311.5 288.4 310.5 ROCE, % * 24.6% 20.2% 23.7% Capital expenditure, excluding 9.8 3.8 22.5 acquisitions Cash flow after investments, -39.7 -31.9 71.2 excluding acquisitions Personnel at period-end 3,543 3,496 3,494 * 12-month rolling average Kemira Coatings increased its revenue by 15% year on year, to EUR 135.8 million (118.6). Due to the warm spring and its premature arrival, all market areas showed a good sales performance. Organic growth stood at 12%. In addition, revenue was boosted by the acquisition in February 2006 of Kraski Teks. Showing a favorable sales performance in all market areas, the Decorative Paints unit improved its revenue by 16%. The Industrial Coatings unit's sales increased by 6%. Operating profit rose by 33%, to EUR 12.8 million (9.6), due to a good sales performance and efficient cost management. In April, Kemira announced the confirmation of the purchase of holdings in two Russian industrial coatings companies. Accordingly, Tikkurila bought 70% holdings in OOO "Gamma" and OOO "Ohtinski zavod poroshkovyh krasok" based in St Petersburgh. With revenue of roughly EUR 8 million and a staff of 100, Gamma is a major manufacturer of metal-industry coatings in Russia. Ohtinski zavod poroshkovyh krasok, a manufacturer and marketer of powder coatings, has revenue of approximately EUR 3 million and personnel of 50. This acquisition will strengthen Kemira's position in the Russian metal-industry coatings market. OTHER OPERATIONS In February, Kemira sold its shareholding (50%) in Kemira Arab Potash Company Ltd (Kemapco) to Arab Potash Company Ltd (APC). Kemira will continue selling potassium nitrate, produced by the Jordanian plant, for a one-year transition period. During the current year, an error was found in the calculation of the provision recognized in 2006 due to the closure of the Water Soluble unit. This prior year's error was corrected retrospectively in the last quarter figures of 2006 in accordance with IAS 8. The provision was increased by EUR 8 million decreasing the result for the last quarter by the same amount. The financial statement section in this interim report provides more detailed information on the correction of this error. In March, Kemira sold all of its shares in OnePoint Oy, a provider of infrastructure and production support services in the Kokkola Industrial Park, to Kokkolan Voima, in accordance with a letter of intent signed in December 2006. Other operations include corporate expenses not charged to the business areas, such as some research and development costs and the costs of the Kemira Corporate Center. KEMIRA OYJ SHARES AND SHAREHOLDERS During January-March, Kemira Oyj shares registered a high of EUR 19.20 and a low of EUR 16.00, the share price averaging EUR 17.60. On March 31, 2007, the company's market capitalization, excluding treasury shares, totaled EUR 2077 million. On March 31, 2007, the company's share capital totaled EUR 221.7 million and the number of registered shares 125,001,310. The reporting period saw the subscription of 33,699 new shares using warrants under the 2001 stock option program. The resulting share capital increase, EUR 59,763.67, was registered in the Traded Register on March 30, 2007. On February 23, 2007, Kemira Oyj transferred 144,143 treasury shares to employees involved in the company's 2006 share-based incentive plan. Kemira holds 3,848,877 treasury shares, accounting for 3.1% of outstanding company shares and voting rights. AGM DECISIONS Based on a decision by the Annual General Meeting on April 16, 2007, the Group paid out a per-share dividend of EUR 0.48, or a total of EUR 58.2 million, on April 26, 2007. As proposed by the Nomination Committee, the AGM re-elected the seven-member Board of Directors for a one-year term, with Anssi Soila, M.Sc. (Eng.) and M.Sc. (Econ.), continuing as Chairman and Eija Malmivirta, M.Sc. (Eng.), as Vice Chairman. Other re-elected Board members include Elizabeth Armstrong, Heikki Bergholm, Ove Mattsson, Kaija Pehu-Lehtonen and Markku Tapio. The AGM re-elected Aulis Ranta-Muotio Chairman of the Supervisory Board, with Mikko Elo as First Vice Chairman and Heikki A. Ollila as Second Vice Chairman, and re-elected Pekka Kainulainen, Mikko Långström, Susanna Rahkonen, Risto Ranki and Katri Sarlund members of the Supervisory Board. The AGM elected KPMG Oy Ab, Authorized Public Accountants, the Company's auditor, with Pekka Pajamo, Authorized Public Accountant, acting as chief auditor. The AGM decided on the following amendments to the Company's Articles of Association: * Article 3 concerning the minimum and maximum share capital, the minimum and maximum number of shares and voting rights conferred by Company shares shall be deleted; * Article 4 shall include a reference to Company shares belonging to the book-entry system, and Article 5 concerning the procedure governing the dividend record date shall be deleted; * Article 7 concerning the term of Supervisory Board members shall be amended in such a way that their term terminates at the close of the Annual General Meeting following their election, instead of one year; * Article 10 concerning the Supervisory Board's duties shall be amended in such a way that the Supervisory Board's duty shall be to supervise the Company's administration for which the Board of Directors and the Managing Director bear responsibility; * Article 13 shall be amended in such a way that "to sign the Company's business name" becomes "the right to represent the Company"; * Article 15 shall be amended in such a way that the Company shall have one auditor, who must be a firm of Authorized Public Accountants. In addition, the stipulation on the age limit shall be deleted from Article 15; * A reference to Article 31 concerning the obligation to redeem shares shall be deleted from Article 17; * Clause 2 of Article 18 shall be deleted; * The terminology of Article 20 concerning the Annual General Meeting shall be specified as required by the new Companies Act and the amendments to the Articles of Association; * Articles 21-36 concerning share redemption shall be deleted; * Article 37 "In other respects, the regulations of the Companies Act currently in force shall be observed" shall be deleted; The AGM authorized the Board of Directors to decide to issue a maximum of 12,500,000 new shares and/or transfer a maximum of 3,848,877 treasury shares held by the Company either against payment or, as part of the implementation of the Company's share-based incentive plan, without payment ("Share issue authorization"). Said new shares may be issued and said treasury shares may be transferred to the Company's shareholders in proportion to their current shareholdings in the Company, or through a private placement if the Company has a cogent financial reason for doing so, such as financing or implementing mergers and acquisitions, developing its capital structure, improving the liquidity of the Company's shares or if this is justified for the purpose of implementing the Company's share-based incentive plan. Private placement may be carried out without payment only in connection with the implementation of the Company's share-based incentive plan. The subscription price of new shares and the amount payable for treasury shares shall be recognized under invested unrestricted equity reserve. The share issue authorization will remain valid until the end of the next Annual General Meeting. The AGM decided that a Nomination Committee be re-established for Kemira to prepare proposals for Board member candidates and Board emoluments for the next AGM. The right of appointing Nomination Committee members, representing Company shareholders, will rest with the three largest shareholders who account for the largest share of the votes conferred by all of the Company's shares on November 1 preceding the Annual General Meeting. The Chairman of the Board of Directors will act as the Committee's expert member. OUTLOOK Full-year revenue, operating profit and earnings per share for 2007 are expected to increase from their 2006 levels. Raw material and energy prices as well as transportation costs are projected to behave more moderately than in 2006. Operational risks were presented in the Annual Report and no significant changes have occurred. Since the production-capacity utilization rates of Kemira Pulp&Paper's customers are expected to be high, the business area's revenue and operating profit are anticipated to grow from the previous year's levels. Kemira has successfully integrated companies acquired in 2006 as part of the Group's global pulp and paper chemicals operations and their favorable contribution to profit performance will be reflected in the growing Far Eastern and South American markets. In March, Kemira Pulp&Paper concluded two new significant supply agreements, which will boost the business area's organic growth. A chemical plant under construction at the site of a pulp mill in Uruguay will be phased in as the customer's pulp production begins during the second half. Kemira Water is expected to increase its revenue and operating profit from 2006 levels, due in particular to its previous acquisitions, and demand for its water treatment chemicals is anticipated to remain at a good level. During 2007, Kemira Water will focus on the integration of acquirees in particular. Kemira Specialty's revenue and operating profit are anticipated to be in line with their 2006 levels, despite first-quarter market developments. Competition is expected to remain tough in the titanium dioxide market. Although demand for titanium dioxide is projected to increase slightly this year, its euro prices are anticipated to remain lower than a year ago. Specialty pigments are expected to further increase their share of Kemira's total sales. The business area's sales of organic acids and acid derivatives are anticipated to show favorable development in most of the areas. Sales of sodium percarbonate, used in detergents, should remain at their 2006 level and prices should decline slightly. Kemira Coatings is expected to generate higher revenue due to demand remaining at a good level in all market areas, with the strongest growth anticipated in Russia and other CIS countries. Operating profit for 2007 is expected to grow year on year (excluding EUR 16.4 million in non-recurring income in operating profit for 2006), spurred by favorable developments in sales and recent years' restructuring. Helsinki, May 2, 2007 Board of Directors All forward-looking statements in this review are based on the management's current expectations and beliefs about future events, and actual results may differ materially from the expectations and beliefs such statements contain. KEMIRA GROUP The figures are unaudited. All figures in this financial report have been rounded and consequently the sum of individual figures can deviate from the presented sum figure. This Interim Consolidated Financial Statement has been prepared in compliance with IAS 34. Kemira Group has corrected a previous year error in accordance with IAS 8. The nature of the error is described in the end of the report. Changes to the accounting policies as of January 1, 2007: - IFRS 7 (Financial Instruments: Disclosures) has been adopted by the Group in 2007 - Revised IAS 1 (Disclosures about capital) has been adopted by the Group in 2007 The Group assesses that the adoption of the revised standards will not have any material effect on its future financial statements. However, the resulting changes will add disclosures to the Financial Statements. INCOME STATEMENT EUR 1-3/2007 1-3/2006 2006 * million Revenue 673.3 552.9 2,522.5 Other income from 6.8 7.8 59.2 operations Expenses -597.5 -485.8 -2,264.5 Depreciation -33.7 -29.4 -123.5 Operating profit 48.9 45.5 193.7 Financial income and -12.2 -7.1 -37.2 expenses Income from associates 0.6 -0.9 -2.3 Profit before tax 37.3 37.5 154.2 Income tax -10.0 -10.9 -42.0 Net profit for the 27.3 26.6 112.2 period Attributable to: Equity holders of the 26.4 25.8 108.6 parent Minority interest 0.9 0.8 3.6 Net profit for the 27.3 26.6 112.2 period BALANCE SHEET EUR million ASSETS 31.3.2007 31.12.2006 Non-current assets Goodwill 632.8 581.0 Other intangible assets 110.3 108.9 Property, plant and 973.8 987.1 equipment Holdings in associates 9.1 8.1 Available-for-sale 84.3 84.3 investments Deferred tax assets 4.8 7.7 Defined benefit pension 23.9 24.6 receivables Other investments 9.0 9.5 Total non-current assets 1,848.0 1,811.2 Current assets Inventories 304.9 293.2 Receivables Interest-bearing 7.6 9.1 receivables Interest-free 603.4 565.4 receivables Total receivables 611.0 574.5 Money market investments 20.8 35.0 - cash equivalents Bank and cash 35.7 41.1 Total current assets 972.4 943.8 Non-current assets held 3.5 14.4 for sale Total assets 2,823.9 2,769.4 EQUITY AND LIABILITIES 31.3.2007 31.12.2006 * Equity attributable to 1,091.6 1,069.9 equity holders of the parent Minority interest 13.5 12.6 Total equity 1,105.1 1,082.5 Non-current liabilities Interest-bearing 580.4 395.1 non-current liabilities Deferred tax liabilities 123.3 105.9 Pension liabilities 65.5 66.8 Provisions 24.7 63.3 Total non-current 793.9 631.1 liabilities Current liabilities Interest-bearing current 440.9 508.5 liabilities Interest-free current 469.9 522.9 liabilities Provisions 14.1 15.5 Total current 924.9 1,046.9 liabilities Liabilities directly associated with non-current assets classified as - 8.9 held for sale Total liabilities 1,718.8 1,686.9 Total equity and 2,823.9 2,769.4 liabilities Non-current assets held for sale include US- and Canada-based factory sites. * Prior year correction included CONSOLIDATED CASH FLOW EUR million 1-3/2007 1-3/2006 2006 STATEMENT Cash flows from operating activities Adjusted operating 81.6 59.5 232.0 profit Interests -5.6 -6.1 -30.4 Dividend income - 0.9 2.0 Other financing items - 1.6 -1.3 Income taxes paid -7.8 -10.6 -45.1 Total funds from 68.2 45.3 157.2 operations Change in net working -98.2 -65.6 59.6 capital Total cash flows from -30.0 -20.3 216.8 operating activities Cash flows from investing activities Capital expenditure -78.3 -57.5 -462.0 Proceeds from sale of -32.5 6.0 102.9 assets Net cash used in -110.8 -51.5 -359.1 investing activities Cash flow after investing -140.8 -71.8 -142.3 activities Cash flows from financing activities Change in long-term loans (increase 118.9 48.1 173.4 +, decrease -) Change in long-term loan receivables 1.4 0.7 1.5 (decrease +, increase -) Short-term financing, net (increase - 74.1 33.8 +, decrease -) Dividends paid - - -46.3 Other 0.8 0.6 -0.2 Net cash used in financing 121.1 123.5 162.2 activities Net change in cash and -19.7 51.7 19.9 cash equivalents Cash and cash 56.5 108.0 76.2 equivalents at end of period Cash and cash equivalents at 76.2 56.3 56.3 beginning of period Net change in cash and -19.7 51.7 19.9 cash equivalents STATEMENT OF CHANGES IN EQUITY Equity attributable to equity holders of the parent Share Share Capital Other Fair value capital issue paid-in reserves reserve in excess of par value Shareholders' equity at 221.3 0.0 257.8 2.8 64.3 January 1, 2006 Net profit for the - - - - - financial year Dividends paid - - - - - Treasury shares issued to - - - - - target group Share-based compensation - - - - - Options subscribed - 0.1 - - - for shares Exchange differences - - - -0.1 - Hedge of net investments - - - - - in foreign entities Cash flow hedging: amount entered in shareholders' equity - - - - 11.5 Acquired minority interest - - - - - Transfer between - - - 0.4 - restricted and non-restricted equity Other changes - - - - - Shareholders' equity at 221.3 0.1 257.8 3.1 75.8 March 31, 2006 Shareholders' equity at 221.6 0.0 257.9 3.1 59.6 January 1, 2007 Net profit for the - - - - - financial year Dividends paid - - - - - Treasury shares issued to - - - - - target group Share-based compensation - - - - - Options subscribed 0.1 - - - - for shares Exchange differences - - - - - Hedge of net investments - - - - - in foreign entities Cash flow hedging: amount entered in shareholders' equity - - - - -4.3 Acquired minority interest - - - - - Transfer between - - - - - restricted and non-restricted equity Other changes - - - 0.1 - Shareholders' equity at 221.7 0.0 257.9 3.2 55.3 March 31, 2007 Equity attributable to equity holders of the parent Exchange Treasury Retained Minority differences shares earnings interests Total Shareholders' equity at -33.9 -27.5 520.7 13.7 1,019.2 January 1, 2006 Net profit for the - - 25.8 0.8 26.6 financial year Dividends paid - - - - 0.0 Treasury shares issued to - 0.7 -0.7 - 0.0 target group Share-based compensation - - - - 0.0 Options subscribed - - - - 0.1 for shares Exchange differences -2.6 - - 0.2 -2.5 Hedge of net investments 2.3 - - - 2.3 in foreign entities Cash flow hedging: amount entered in shareholders' equity - - - - 11.5 Acquired minority interest - - - 0.3 0.3 Transfer between - - -0.4 - 0.0 restricted and non-restricted equity Other changes - - -0.2 0.2 0.0 Shareholders' equity at -34.2 -26.8 545.2 15.2 1,057.5 March 31, 2006 Shareholders' equity at -30.8 -26.8 585.3 12.6 1082.5 January 1, 2007 Net profit for the - - 26.4 0.9 27.3 financial year Dividends paid - - - - 0.0 Treasury shares issued to - 0.9 -0.9 - 0.0 target group Share-based compensation - - 0.4 - 0.4 Options subscribed - - - - 0.1 for shares Exchange differences -4.0 - - - -4.0 Hedge of net investments 2.8 - - - 2.8 in foreign entities Cash flow hedging: amount entered in shareholders' equity - - - - -4.3 Acquired minority interest - - - - 0.0 Transfer between - - - - 0.0 restricted and non-restricted equity Other changes - - 0.2 - 0.3 Shareholders' equity at -32.0 -25.9 611.4 13.5 1,105.1 March 31, 2007 At the end of the year 2006 there were 3,979,670 treasury shares. Of the shares that were granted in connection with the share-based incentive plan 13,350 were returned to Kemira in 2007. A total of 144,143 shares were issued to key persons based on the incentive plan on February 23, 2007. The total equivalent book value of the shares issued amounted to approx. EUR 255,133. The issue does not materially affect the distribution of ownership and voting power in the company. Kemira had in its possession 3,848,877 of its treasury shares at March 31, 2007. Their average acquisition share price was EUR 6.73 and the treasury shares represented 3.1% of the share capital and of the aggregate number of votes conferred by all the shares. The equivalent book value of the treasury shares is EUR 6.9 million. KEY FIGURES 1-3/2007 1-3/2006 2006 Earnings per 0.22 0.21 0.90 share, basic and diluted, EUR Cash flow from -0.25 -0.17 1.79 operations per share, EUR Capital 78.3 57.5 462.0 expenditure, EUR million Capital 11.6 10.4 18.3 expenditure / revenue, % Average number 121,091 120,759 120,877 of shares (1000), basic *) Average number 121,197 121,028 121,051 of shares (1000), diluted *) Number of shares 121,152 120,861 120,988 at the end of the period (1000), basic *) Number of shares 121,191 121,033 121,204 at the end of the period (1000), diluted *) Equity per 9.01 8.62 8.85 share, attributable to equity holders of the parent, EUR Equity ratio, % 39.2 42.4 39.2 Gearing, % 87.3 65.4 76.4 Net liabilities, 964.5 690.6 827.4 EUR million Personnel 9,431 8,357 9,186 (average) *) Number of shares outstanding, adjusted by the number of shares bought back. REVENUE BY EUR 1-3/2007 1-3/2006 2006 BUSINESS AREA million Kemira 255.3 209.5 993.3 Pulp&Paper Kemira Water 170.0 92.3 467.6 Kemira Specialty 103.5 118.6 456.2 Kemira Coatings 135.8 118.6 562.8 Other and 8.7 13.9 42.6 Intra-Group sales Total Group 673.3 552.9 2,522.5 OPERATING PROFIT 1-3/2007 1-3/2006 2006 BY BUSINESS AREA Kemira 23.0 26.0 90.8 Pulp&Paper Kemira Water 11.9 6.4 35.3 Kemira Specialty 10.3 11.3 45.8 Kemira Coatings 12.8 9.6 72.1 Other and -9.1 -7.8 -50.3 eliminations Total Group 48.9 45.5 193.7 CHANGES IN EUR 1-3/2007 1-3/2006 2006 PROPERTY, PLANT million AND EQUIPMENT Carrying amount 987.1 864.9 865.0 at beginning of year Acquisitions of 17.0 17.9 151.9 subsidiaries Increases 1.8 28.6 154.4 Decreases -2.7 -1.9 -42.0 Depreciation and -28.4 -25.3 -43.3 impairments Exchange rate -1.0 -26.2 -98.9 differences and other changes Net carrying 973.8 858.0 987.1 amount at end of period CHANGES IN EUR 1-3/2007 1-3/2006 2006 INTANGIBLE million ASSETS Carrying amount 689.8 629.7 629.7 at beginning of year Acquisitions of 6.2 26.5 71.8 subsidiaries Increases 53.3 2.1 18.1 Decreases -0.6 -0.1 -0.4 Depreciation and -4.3 -4.0 -17.2 impairments Exchange rate -1.3 -3.5 -12.1 differences and other changes Net carrying 743.1 650.7 689.9 amount at end of period CONTINGENT EUR 31.3.2007 31.12.2006 LIABILITIES million Mortgages 61.1 64.8 Assets pledged On behalf of 19.2 19.5 own commitments Guarantees On behalf of 6.5 6.4 own commitments On behalf of 33.2 32.6 associates On behalf of 3.6 1.4 others Operating leasing liabilities Maturity 14.8 14.9 within one year Maturity after 115.2 118.1 one year Other obligations On behalf of 0.3 0.4 own commitments On behalf of 2.4 2.3 associates Litigation The Group has extensive international operations and is involved in a number of legal proceedings incidental to these operations. The Group does not expect the outcome of any legal proceedings currently pending to have a materially adverse effect upon the Group's consolidated result. Kemira Chemicals, Inc. has received a grand jury subpoena to produce documents in connection with an investigation by the United States Department of Justice's Antitrust Division, relating to the hydrogen peroxide business in the US. Kemira Oyj, Kemira Chemicals, Inc. and Kemira Chemicals Canada, Inc. have recently received claims or were named in class action lawsuits filed by direct and indirect purchasers of hydrogen peroxide and persalts in US federal and state courts and in Canada. In these civil actions it is alleged that the US plaintiffs suffered damages resulting from a cartel among hydrogen peroxide suppliers. The existence of the United States Departments of Justice's Antitrust Division's investigations and the European Commission's ruling in a case of infringement of competition law in May 2006 are relied upon in support of the allegations. RELATED PARTY Related party transactions have not changed materially after annual closing 2006. DERIVATIVE EUR INSTRUMENTS million 31.3.2007 31.12.2006 Nominal Fair Nominal Fair value value value value Currency instruments Forward 397.8 2.2 389.4 5.5 contracts of which - - 19.6 2.2 hedges of net investment in a foreign operation Currency options Bought 38.9 0.1 42.8 - Sold 35.6 - 45.3 0.2 Currency swaps 148.8 5.5 115.9 8.4 Interest rate instruments Interest rate 125.8 4.2 109.2 4.7 swaps of which cash 93.2 3.8 83.8 4.2 flow hedge Interest rate options Bought - - - - Sold - - - - Bond futures 10.0 - 10.0 -0.2 of which open 10.0 - 10.0 -0.2 Other instuments Fair Fair value value Electricity GWh 1076.8 4.6 GWh 1,227.0 10.4 forward contracts of which cash GWh 1076.8 4.6 GWh 1,227.0 10.4 flow hedge Propane swap Tons - - Tons 1,000.0 -0.1 contracts The fair values of the instruments which are publicly traded are based on market valuation on the date of reporting. Other instruments have been valuated based on net present values of future cash flows. Valuation models have been used to estimate thefair values of options. Nominal values of the financial instruments do not necessarily correspond to the actual cash flows between the counterparties and do not therefore give a fair view of the risk position of the Group. BUSINESS COMBINATIONS The Cytec water treatment business Kemira acquired the Cytec Industries, Inc.'s water treating and acryl amide business on October 1, 2006. Cytec's water treatment chemicals product line consists of water treatment solutions for industrial and municipal water treatment plants. The acquisition includes five production plants of which three are located in the US (Mobile/Alabama, Longview/Washington, and Fortier/Louisiana), and two in Europe (Bradford /UK and Botlek/the Netherlands). The acquisition of Cytec's water treatment chemicals business is in line with Kemira's growth strategy. It also enables the Group to significantly broaden its current product portfolio and gain greater geographical presence in key markets and inside key customer segments. The acquired business' market regions include the US, South America, Asia and Europe. The total price of the acquisition is approx. EUR 197 million but the amount is subject to the adjustment of net working capital. Capitalized acquisition costs directly attributed to the combination were EUR 2.9 million March 31, 2007. The acquisition was financed with Kemira Group's own cash assets and through existing financing agreements. In addition to the purchase of the business (asset purchase agreement) which was closed October 1, 2006, Kemira signed a share purchase agreement to buy the shares of Cytec Manufacturing BV. The closing and payment of the share purchase was on January 11, 2007. Kemira has also signed transition service agreements with nine Cytec companies concerning certain transition services with respect of the products of the business (Overseas units). The assets related to these transition service agreements will be transferred to Kemira and paid gradually starting on April 1 and ending on July 1, 2007. The control over the whole Cytec water treatment business was transferred to Kemira on October 1, 2006. The purchase price allocation of the Cytec water treatment business has been made for the March 31, 2007 financial statements. The fair values of the business combination's intangible assets consist of global patents, customer related assets and manufacturing knowhow. Business combination has been done preliminarily since the business transfers of the Overseas units are still on-going according to the plan. Fair values Carrying recorded on amounts prior business to business combination combination Intangible 15.5 - assets Property, plant 91.0 54.7 and equipment Inventories 35.0 33.3 Trade 34.9 34.9 receivables and other receivables Cash and cash 0.3 0.3 equivalents Total assets 176.7 123.2 Interest bearing - - current liabilities Other 12.9 12.8 liabilities Deferred tax 18.0 - liabilities Total 30.9 12.8 liabilities Net assets 145.8 110.4 Cost of business 197.1 combination (net) Goodwill 51.3 Acquisition cost 197.1 Overseas units -12.5 Cash and cash -0.3 equivalents in subsidiary acquired Cash outflow on 184.3 acquisition The revenue of the acquired unit for January 1 - March 31, 2007 totaled EUR 69.7 million and operating profit EUR 3.2 million. DEFINITIONS OF KEY FIGURES Earnings per share (EPS) Net profit attributable to equity holders of the parent Average number of shares Cash flow from operations Cash flow from operations, after change in net working capital and before investing activities Cash flow from operations per share Cash flow from operations Average number of shares Equity per share Equity attributable to equity holders of the parent at end of quarter Number of shares at end of quarter Equity ratio, % Shareholders' equity x 100 Total assets - prepayments received Gearing, % Interest-bearing net liabilities x 100 Shareholders' equity Net liabilities Liabilities - bank and cash - money market investments PRIOR PERIOD ERROR An error was discovered related to the financial statements of 2006 and has been corrected retrospectively according to IAS 8. The error was related to the calculation of the provision made for the closure of the Water Soluble business unit and as a result of this the provision was reported 8 million euro too low. This has been corrected to the fourth quarter result of 2006. The income statement of full year 2006 and the balance sheet at December 31, 2006 were changed as follows: INCOME EUR Reported Corrected 2006 STATEMENT million 2006 Revenue 2,522.5 2,522.5 Other income 59.2 59.2 from operations Expenses -2,256.5 -2,264.5 Depreciation -123.5 -123.5 Operating profit 201.7 193.7 Financial income -37.2 -37.2 and expenses Income from -2.3 -2.3 associates Profit before 162.2 154.2 tax Income tax -42.0 -42.0 Net profit for 120.2 112.2 the period Attributable to: Equity holders 116.6 108.6 of the parent Minority 3.6 3.6 interest Net profit for 120.2 112.2 the period KEY FIGURES Reported Corrected 2006 2006 Earnings per 0.96 0.90 share, basic and diluted, EUR BALANCE SHEET EUR Reported Corrected million 31.12.2006 31.12.2006 Equity 1,077.9 1,069.9 attributable to equity holders of the parent Total equity 1,090.5 1,082.5 Provisions 55.3 63.3 Total 623.1 631.1 non-current liabilities Retrospective restated quarterly figures are presented as appendix to this interim report. QUARTERLY EARNINGS PERFORMANCE 2007 2006 (Unaudited 1-3 1-3 4-6 7-9 10-12 Total figures) Revenue Kemira 255.3 209.5 257.9 261.9 264.0 993.3 Pulp&Paper Kemira Water 170.0 92.3 102.1 101.7 171.5 467.6 Kemira 103.5 118.6 107.6 112.8 117.2 456.2 Speciality Kemira Coatings 135.8 118.6 170.3 164.6 109.3 562.8 Other and 8.7 13.9 9.6 11.6 7.5 42.6 intra-Group sales Total 673.3 552.9 647.5 652.6 669.5 2,522.5 Operating profit Kemira 23.0 26.0 20.4 24.3 20.1 90.8 Pulp&Paper Kemira Water 11.9 6.4 9.6 9.0 10.3 35.3 Kemira 10.3 11.3 11.7 11.7 11.1 45.8 Speciality Kemira Coatings 12.8 9.6 25.0 39.0 -1.5 72.1 Other -9.1 -7.8 -15.2 -8.9 -18.4 -50.3 including eliminations Total 48.9 45.5 51.5 75.1 21.6 193.7 Financial income -12.2 -7.1 -5.8 -11.6 -12.7 -37.2 and expenses Share of 0.6 -0.9 -0.6 0.3 -1.1 -2.3 associates' results Profit before 37.3 37.5 45.1 63.8 7.8 154.2 tax Income tax -10.0 -10.9 -13.1 -17.9 -0.1 -42.0 Net Profit 27.3 26.6 32.0 45.9 7.7 112.2 Attributable to Equity holders 26.4 25.8 31.0 45.0 6.8 108.6 of the parent Minority 0.9 0.8 1.0 0.9 0.9 3.6 interests Net Profit 27.3 26.6 32.0 45.9 7.7 112.2 Earnings per 0.22 0.21 0.26 0.37 0.12 0.90 share, diluted, EUR Capital 1,924.6 1,876.6 employed, rolling ROCE, % 10.2 % 10.2 % For further information, please contact: Kemira Oyj Timo Leppä, Executive Vice President, Group Communications Tel. 010 862 1700 Kemira Oyj Andreas Langhoff, Investor Relations Manager Tel. 010 862 1140 Kemira will hold a press conference on its January-March 2007 results for the media and analysts at its head office (Porkkalankatu 3) today, starting at 10:30 a.m. A conference call in English will be held at 1:00 p.m. We kindly request that participants call us around 10 minutes before the conference begins, on +44 (0)20 7162 0025. Kemira is a chemicals group made up of four business areas: Kemira Pulp&Paper, Kemira Water, Kemira Specialty and Kemira Coatings. Kemira is a global group of leading chemical businesses with a unique competitive position and a high degree of mutual synergy. In 2006, Kemira recorded revenue of around EUR 2.5 billion and had a payroll of 9,000 employees. The company operates in 40 countries.