Kemira Group Interim Report, January-June 2007
KEMIRA'S REVENUE UP BY 16% IN Q2
- Revenue in April-June: EUR 753.0 million (Q2/2006: EUR 647.5
million), up 16%
- Operating profit: EUR 57.6 million (EUR 51.5 million), up 12%; up
32% when excluding the effect of non-recurring items
- Earnings per share: EUR 0.27 (EUR 0.26), up 4%
- Full-year revenue, operating profit and earnings per share are
expected to improve from their 2006 levels
KEY FIGURES AND RATIOS
EUR million 4-6/2007 4-6/2006 Change 1-6/2007 1-6/2006 Change 1-12/2006**
% %
REVENUE 753.0 647.5 16 1 426.3 1 200.4 19 2 522.5
EBITDA 89.9 81.5 10 172.5 156.4 10 317.2
EBITDA, % 11.9% 12.6% 12.1% 13.0% 12.6%
OPERATING 57.6 51.5 12 106.5 97.0 10 193.7
PROFIT
Operating 7.6% 8.0% 7.5% 8.1% 7.7%
profit, %
Operating
profit, excl.
non-recurring
items 56.6 42.8 32 104.7 83.0 26 170.5
Financial
income and
expenses -12.6 -5.8 -24.8 -12.9 -37.2
PROFIT BEFORE 45.7 45.1 1 83.0 82.6 0 154.2
TAX
Profit before 6.1% 7.0% 5.8% 6.9% 6.1%
tax, %
NET PROFIT 33.3 32.0 4 60.6 58.6 3 112.2
EPS, EUR 0.27 0.26 4 0.48 0.47 2 0.90
Capital 1,975.5 1,824.1 1,975.5 1,824.1 1,876.6
employed*
ROCE, %* 10.3% 10.4% 10.3% 10.4% 10.2%
Cash flow
after
investments,
excluding
acquisitions -6.4 44.0 -124.0 2.5 155.0
Personnel at 10,588 9,695 10,588 9,695 9,327
period-end
* 12-month rolling average
** Prior year correction included (see page 8)
REVENUE AND OPERATING PROFIT FOR APRIL-JUNE
Kemira Group's revenue for April-June 2007 rose by 16% year on year,
to EUR 753.0 million (Q2/2006: EUR 647.5 million). In particular,
acquisitions contributed around EUR 90.4 million to revenue growth.
Divestments depressed revenue by EUR 9.1 million. Organic growth was
6%, excluding the currency effect, which had a 2% negative impact on
revenue.
Operating profit grew by 12%, to EUR 57.6 million (51.5), with
acquisitions contributing approximately EUR 4.6 million to the
figure. Operating profit includes non-recurring items, with their net
effect on operating profit amounting to EUR 1.0 million positive
compared with EUR +8.7 million reported a year ago. Excluding the
effect of non-recurring items, operating profit totaled EUR
56.6 million (42.8), or an increase of 32% year on year.
Non-recurring items included in operating profit:
EUR million 4-6/2007 4-6/2006 1-6/2007 1-6/2006 1-12/2006
Kemira Pulp&Paper - 3.1 1.3 7.6 11.0
Kemira Water - 0.2 - 0.2 -0.2
Kemira Specialty - 2.1 - 2.1 3.6
Kemira Coatings - 3.3 - 3.3 16.4
Other, including 1.0 - 0.5 0.8 -7.6
eliminations
Total 1.0 8.7 1.8 14.0 23.2
Profit before tax came to EUR 45.7 million (45.1) and net profit
totaled EUR 33.3 million (32.0).
REVENUE AND OPERATING PROFIT FOR JANUARY-JUNE
In January-June 2007, Kemira Group's revenue rose by 19% year on
year, to EUR 1,426.3 million (1,200.4). Acquisitions contributed
around EUR 219.4 million to revenue growth, while divestments
depressed revenue by EUR 17.4 million. Organic growth was 4%,
excluding the currency effect, which had a 2% negative impact on
revenue.
Operating profit grew by 10%, to EUR 106.5 million (97.0). Operating
profit for January-June includes non-recurring income, with their net
effect on operating profit amounting to EUR 1.8 million, compared
with non-recurring income of EUR 14.0 million reported a year ago.
Excluding the effect of non-recurring items, operating profit totaled
EUR 104.7 million (83.0), or an increase of 26% year on year. During
the current year, the Group has particularly invested in the
development of purchasing and logistics processes and IT services.
The costs due to these investments are included in other operations.
Earnings per share for January-June were EUR 0.48 (0.47).
RESEARCH AND DEVELOPMENT
In January-June, reported research and development expenditure
totaled EUR 25.7 million (26.1), accounting for 1.8% of revenue
(2.2%).
CAPITAL EXPENDITURE
Gross capital expenditure, excluding acquisitions, amounted to
EUR 121.1 million (59.6) in January-June. The largest ongoing
investments involve a chemical plant under construction at the site
of the Botnia pulp mill in Uruguay (EUR 23.0 million) and a paint
factory under construction in the Stockholm area (EUR 8.5 million).
Maintenance investments represented around 28% of capital
expenditure, excluding acquisitions.
In the January-June period, Group depreciation came to
EUR 66.0 million (59.4).
Gross capital expenditure, including acquisitions worth
EUR 44.6 million (102.2), totaled EUR 165.7 million (161.8).
FINANCIAL POSITION AND CASH FLOWS
In January-June, the Group reported positive cash flows of EUR 23.1
million from operating activities (EUR 28.3 million). The Group
generated negative net cash flows of EUR 191.7 million from investing
activities, of which acquisitions accounted for an outflow of
EUR 44.6 million. Kemira showed a free cash flow of
EUR -168.6 million (EUR -99.7 million). In April, Kemira Oyj paid out
EUR 58.2 million in dividends to its shareholders.
On June 30, 2007, the Group's net liabilities stood at
EUR 1,067.4 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.
At the period-end, interest-bearing liabilities stood at
EUR 1,129.6 million. The duration of the Group's interest-bearing
loan portfolio on June 30, 2007, was 13 months (December 31, 2006, 16
months).
At the end of June, the equity ratio stood at 37% (December 31, 2006:
39%), while gearing was 98% (December 31, 2006: 76%).
In the January-June period, net financial expenses increased to
EUR 24.8 million (12.9), due mainly to higher interest bearing debt.
Cash and cash equivalents on June 30, 2007, totaled EUR 62.2 million
(June 30, 2006: EUR 110.2 million).
In July, Kemira signed a 5-year bilateral bank credit agreement of
USD 68 million. The loan is used in general financing needs of the
Kemira Group.
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 sheets. The amount of outstanding sold
receivables on June 30, 2007, was EUR 47.9 million (December 31,
2006: EUR 15.7 million).
The Group's most important exchange rate risk arises from the USD
denominated exports from the euro area. Approximately 60% of the
exchange rate risk, equivalent to EUR 50 million, due to exposure to
US dollar, was hedged. In addition, the company is exposed to USD
risk when USD denominated items are converted into euro in the
financial statements. Revenue for the companies located in the United
States accounted for 18% of the Group's revenue.
HUMAN RESOURCES
The number of Group employees totaled 10,588 on June 30 (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 4-6/2007 4-6/2006 Change 1-6/2007 1-6/2006 Change 1-12/2006
% %
REVENUE 260.1 257.9 1 515.4 467.4 10 993.3
EBITDA 34.9 31.9 9 70.4 68.9 2 137.1
EBITDA, % 13.4% 12.4% 13.7% 14.7% 13.8%
OPERATING 23.4 20.4 15 46.4 46.4 0 90.8
PROFIT
Operating 9.0% 7.9% 9.0% 9.9% 9.1%
profit, %
Operating
profit, excl.
non-recurring
items 23.4 17.3 35 45.1 38.8 16 79.8
Capital 813.4 806.9 813.4 806.9 819.5
employed*
ROCE, %* 11.2% 11.1% 11.2% 11.1% 11.0%
Capital
expenditure,
excluding
acquisitions 20.8 17.4 43.1 32.0 77.6
Cash flow
after
investments,
excluding
acquisitions -11.1 15.5 -18.8 21.1 65.1
Personnel at 2,401 2,405 2,401 2,405 2,304
period-end
* 12-month rolling average
In April-June, Kemira Pulp&Paper reported year-on-year revenue growth
of 1%, totaling EUR 260.1 million (257.9). Organic growth stood at
7%, excluding the currency effect, which had a 4% negative impact on
revenue. Operating profit was also lowered by the Korean hydrogen
peroxide business, divested in 2006.
Operating profit for the period grew by 15%, to EUR 23.4 million
(EUR 20.4 million, including EUR 3.1 million in non-recurring
income). Excluding the effect of non-recurring items, operating
profit increased by 35% year on year. Operating profit was improved
by the moderate development of raw material prices, efficient cost
management and healthy demand particularly for pulp chemicals. In
addition, the integration of acquired companies continued to progress
according to plan.
In June, Kemira announced an intent to increase the production of
calcium sulfate pigment, used as paper pigment, at Siilinjärvi by
25,000 tons to 175,000 tons. The value of the investment amounts to
EUR 4.9 million. Kemira's paper pigment production plants are located
in Siilinjärvi, Finland, and in Besalu, Spain. The calcium sulfate
technology has been developed and productized by Kemira in
cooperation with the Finnish forest industry and forest research
communities. Calcium sulfate pigment is used as filler and coating
pigment for paper and cardboard.
In January-June, Kemira Pulp&Paper's revenue grew by 10%, to
EUR 515.4 million (467.4), due largely to the acquisition of the
Lanxess paper chemicals business in April 2006. Organic growth stood
at 5%, excluding the currency effect, which had a 3% negative impact
on revenue. Reported operating profit for January-June 2007 was
EUR 46.4 million (46.4), including EUR 1.3 million (7.6) in
non-recurring income. Excluding the effect of non-recurring items,
operating profit totaled EUR 45.1 million (38.8), or an increase of
16% year on year.
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 4-6/2007 4-6/2006 Change 1-6/2007 1-6/2006 Change 1-12/2006
% %
REVENUE 185.1 102.1 81 355.1 194.4 83 467.6
EBITDA 20.0 13.5 48 38.8 23.8 63 53.4
EBITDA, % 10.8% 13.2% 10.9% 12.2% 11.4%
OPERATING 13.0 9.6 35 24.9 16.0 56 35.3
PROFIT
Operating 7.0% 9.4% 7.0% 8.2% 7.5%
profit, %
Operating
profit, excl.
non-recurring
items 13.0 9.4 38 24.9 15.8 58 35.5
Capital 371.0 229.4 371.0 229.4 269.2
employed*
ROCE, %* 12.1% 13.9% 12.1% 13.9% 13.4%
Capital
expenditure,
excluding
acquisitions 11.1 4.2 18.8 7.0 19.4
Cash flow
after
investments,
excluding
acquisitions 16.2 3.1 5.7 1.0 26.7
Personnel at 2,235 1,499 2,235 1,499 1,846
period-end
* 12-month rolling average
In April-June, Kemira Water's revenue improved by 81%, to
EUR 185.1 million (102.1), due to the acquisition of Cytec, Galvatek,
and Parcon in October 2006. Organic growth stood at 2%, excluding the
currency effect, which had a 1% negative impact on revenue.
During the April-June period, operating profit grew by 35%, to EUR
13.0 million (9.6), due to company acquisitions in particular.
In April, Kemira bought an 80% shareholding in 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.
Acquisition of two companies owned by the Brazilian company Dalquim
Industria e Comercio Ltda was completed in April. With combined
annual 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 in the southern states of
Brazil. The acquisition bolsters 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.
In January-June, Kemira Water reported year-on-year revenue growth of
83%, to EUR 355.1 million (194.4). Organic growth stood at 4%,
excluding the currency effect, which had a 3% negative impact on
revenue. Operating profit grew by 56%, to EUR 24.9 million
(EUR 16.0 million, including EUR 0.2 million in non-recurring
income).
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 4-6/2007 4-6/2006 Change 1-6/2007 1-6/2006 Change 1-12/2006
% %
REVENUE 110.6 107.6 3 214.1 226.2 -5 456.2
EBITDA 14.9 19.4 -23 33.0 38.4 -14 77.0
EBITDA, % 13.5% 18.0% 15.4% 17.0% 16.9%
OPERATING 7.1 11.7 -39 17.4 23.0 -24 45.8
PROFIT
Operating 6.4% 10.9% 8.1% 10.2% 10.0%
profit, %
Operating
profit, excl.
non-recurring
items 7.1 9.6 -26 17.4 20.9 -17 42.2
Capital 443.8 456.1 443.8 456.1 451.6
employed*
ROCE, %* 9.1% 11.2% 9.1% 11.2% 10.1%
Capital
expenditure,
excluding
acquisitions 15.1 5.5 24.6 10.3 30.8
Cash flow
after
investments,
excluding
acquisitions -16,9 4.7 -24.4 20.0 53.6
Personnel at 1,182 1,185 1,182 1,185 1,011
period-end
* 12-month rolling average
In April-June, Kemira Specialty's revenue improved by 3%, to
EUR 110.6 million (107.6). Organic growth stood at 2%, excluding the
currency effect, which had a 3% negative impact on revenue.
Competition in the titanium dioxide market remained fierce and the
average sales price for titanium dioxide was lower than in the
previous year. Due to the development of the US housing market,
American companies have increased the export of titanium dioxide to
Europe, which has increased the price competition. In addition the
development of the US dollar has improved the competitive position of
American companies in Europe.
The operating profit in April-June came to EUR 7.1 million
(EUR 11.7 million, including EUR 2.1 million in non-recurring
income), chiefly due to lower titanium dioxide sales prices.
Excluding the effects of non-recurring items, operating profit
decreased by 26%.
In May, Kemira announced the initiation of a process to evaluate
ownership alternatives for its business units Pigments and Chemidet.
This process is estimated to conclude by year end 2007. The
ChemSolutions business unit became part of Kemira's Pulp&Paper
business on July 1, 2007, and it will continue its current operations
in line with its recently outlined customer segment strategy. The
Kemira Specialty business area will cease to exist if Pigments' and
Chemidet's ownership changes.
Kemira Pigments produces titanium dioxide in Pori, Finland, and
operates a technology center in Germany and a cosmetics markets
company called TRI-K Industries in the Unites States, acquired in
April to expand the company's cosmetics business, especially in the
field of skin care and hair care. Kemira Pigments focuses on high
value-added, high growth markets such as the flexible packaging and
cosmetics industries, where it holds leading market positions.
Pigments' revenue in 2006 totaled EUR 230 million. Chemidet produces
sodium percarbonate for the detergent industry, in Helsingborg,
Sweden, its revenue in 2006 being EUR 54 million. ChemSolutions
specializes in organic acids and acid derivatives for demanding
customer applications, and reported revenue of EUR 170 million in
2006.
In July, Kemira announced it would increase its production capacity
of calcium propionate used for feed and food industries by
establishing a production site in China. The site's production
capacity will be 15 000 tons, and it will be ready by year end 2008
at Kemira's site in Yixing, East China. The investment also includes
production capacity for feed additives mixtures. Establishment of the
production facility strengthens Kemira's position as the leading
producer of calcium propionate, and creates the basis for developing
Kemira's market position as the leading solutions provider for the
feed and food industries.
In January-June, Kemira Specialty's revenue fell by 5%, to
EUR 214.1 million (226.2). Operating profit stood at EUR 17.4 million
(EUR 23.0 million, including EUR 2.1 million in non-recurring
income). Without the effect of non-recurring items, operating profit
declined by 17%.
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 4-6/2007 4-6/2006 Change 1-6/2007 1-6/2006 Change 1-12/2006
% %
REVENUE 188.7 170.3 11 324.5 288.9 12 562.8
EBITDA 31.4 29.6 6 48.5 42.8 13 88.9
EBITDA, % 16.6% 17.4% 14.9% 14.8% 15.8%
OPERATING 27.3 25.0 9 40.1 34.6 16 72.1
PROFIT
Operating 14.5% 14.7% 12.4% 12.0% 12.8%
profit, %
Operating
profit, excl.
non-recurring
items 27.3 21.7 26 40.1 31.3 28 55.7
Capital 312.0 296.6 312.0 296.6 310.5
employed*
ROCE, %* 25.4% 21.3% 25.4% 21.3% 23.7%
Capital
expenditure,
excluding
acquisitions 12.4 3.5 22.2 7.3 22.5
Cash flow
after
investments,
excluding
acquisitions 15.8 15.7 -23.9 -16.2 71.2
Personnel at 4,218 3,868 4,218 3,868 3,494
period-end
* 12-month rolling average
In April-June, Kemira Coatings increased its revenue by 11% year on
year, to EUR 188.7 million (170.3). Organic growth stood at 9%.
Operating profit for April-June grew by 9%, to EUR 27.3 million
(EUR 25.0 million, including EUR 3.3 million in non-recurring
income). Excluding the effect of non-recurring items, operating
profit increased by 26% year on year. The rise in operating profit
was due to favorable sales performance in all market areas and
efficient cost management.
April saw the completion of the acquisition of two Russian industrial
coatings companies. Accordingly, Tikkurila bought 70% holdings in OOO"Gamma" and OOO "Ohtinski zavod poroshkovyh krasok" based in St
Petersburg. 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.
In May, Kemira Coatings established a new sales company in China.
Tikkurila (Beijing) Paints Co., Ltd began its operations on May 22,
2007, in Beijing. At the same time, Tikkurila acquired the sales
company CEIEC-Feelings operating in China. CEIEC-Feelings' business
operations and the staff of 50 persons are transferred to the new
company. CEIEC-Feelings has been operating since 2002 as the importer
of Tikkurila's decorative paints in China. Revenue for 2007 is
estimated at approximately EUR 2 million. The completed acquisition
targets at consolidating a basis for a powerful development of
Kemira's market position in the rapidly growing decorative paints
market in China.
In January-June, Kemira Coatings' revenue went up by 12%, to
EUR 324.5 million (288.9), with organic growth at 10%. In addition,
revenue was boosted by the acquisition in February 2006 of Kraski
Teks and the acquisition in April of two Russian industrial coating
companies. Operating profit stood at EUR 40.1 million
(EUR 34.6 million, including EUR 3.3 million in non-recurring
income). Excluding the effect of non-recurring items, operating
profit increased by 28% year on year.
OTHER OPERATIONS
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. During the current year, the
Group is particularly investing in harmonizing and enhancing its
purchasing and logistics processes and IT services. Investments of
several million euro aim at generating cost savings in the
forthcoming years as well as increasing the agility and flexibility
to respond to the changes in the business environment.
Other operations also include the water-soluble fertilizers unit,
which is not part of Kemira's core business operations. In February,
Kemira sold its shareholding (50%) in Kemira Arab Potash Company Ltd
(Kemapco), part of Water Soluble, 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 first quarter of the current year, an error was found and
reported 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.
KEMIRA OYJ SHARES AND SHAREHOLDERS
During January-June, Kemira Oyj shares registered a high of EUR 19.20
and a low of EUR 15.26, the share price averaging EUR 17.07. On June
30, 2007, the company's market capitalization, excluding treasury
shares, totaled EUR 2,133 million.
On June 30, 2007, the company's share capital totaled EUR 221.8
million and the number of registered shares 125,045,000. The
April-June period saw subscription of 43,690 new shares using
warrants under the 2001 stock option program. The resulting share
capital increase, EUR 77,482.27, was registered in the Trade Register
on June 27, 2007, with trading with new shares beginning on June 28,
2007. As the 2001 stock option program ended in May, no more
outstanding warrants exist for share subscription.
Kemira holds 3,850,868 treasury shares, accounting for 3.1% of
outstanding company shares and voting rights.
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. 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 of 2007.
Kemira Water is expected to increase its revenue and operating profit
from 2006 levels, due in particular to the 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
remain lower than their 2006 levels. Competition is expected to
remain tough in the titanium dioxide market. The sales forecast for
the remainder of the year is based on stable volumes versus 2006, but
continuing negative impact on sales revenue from currency and USD
based European imports. The business area's sales of organic acids
and acid derivatives are anticipated to continue favorably in most of
the areas. Sales revenue of sodium percarbonate, used in detergents,
are forecasted to be slightly lower than prior year, with stable
volumes and slightly lower prices.
Process on the evaluation of various ownership alternatives for
Pigments and Chemidet is expected to conclude during 2007. If the
evaluations progress as anticipated, these businesses will be
reported as discontinued businesses as of the third quarter. The
ChemSolutions business unit became part of Kemira's Pulp&Paper
business on July 1, 2007, and, as of the third quarter, it will be
reported as such.
Kemira Coatings is expected to generate higher revenue due to demand
remaining at a good level in all its 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 included in operating profit
for 2006), spurred by favorable developments in sales and recent
years' restructuring.
Helsinki, July 26, 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 4-6/2007 4-6/2006 1-6/2007 1-6/2006 2006*
EUR million
Revenue 753.0 647.5 1,426.3 1,200.4 2,522.5
Other income from
operations 5.9 13.7 12.7 21.5 59.2
Expenses -669.1 -579.7 -1,266.5 -1,065.5 -2,264.5
Depreciation -32.3 -30.0 -66.0 -59.4 -123.5
Operating profit 57.6 51.5 106.5 97.0 193.7
Financial income and
expenses -12.6 -5.8 -24.8 -12.9 -37.2
Income from associates 0.7 -0.6 1.3 -1.5 -2.3
Profit before tax 45.7 45.1 83.0 82.6 154.2
Income tax -12.4 -13.1 -22.4 -24.0 -42.0
Net profit for the period 33.3 32.0 60.6 58.6 112.2
Attributable to:
Equity holders of the 32.3 31.0 58.7 56.8 108.6
parent
Minority interest 1.0 1.0 1.9 1.8 3.6
Net profit for the period 33.3 32.0 60.6 58.6 112.2
BALANCE SHEET
EUR million
ASSETS 30.6.2007 31.12.2006*
Non-current assets
Goodwill 629.2 581.0
Other intangible assets 117.8 108.9
Property, plant and equipment 1,008.1 987.1
Holdings in associates 8.2 8.1
Available-for-sale investments 85.3 84.3
Deferred tax assets 7.6 7.7
Defined benefit pension receivables 24.9 24.6
Other investments 9.4 9.5
Total non-current assets 1,890.5 1,811.2
Current assets
Inventories 303.2 293.2
Receivables
Interest-bearing receivables 2.7 9.1
Interest-free receivables 679.6 565.4
Total receivables 682.3 574.5
Money market investments -
cash equivalents 26.9 35.0
Bank and cash 35.3 41.1
Total current assets 1,047.7 943.8
Non-current assets held for sale 1.9 14.4
Total assets 2,940.1 2,769.4
EQUITY AND LIABILITIES 30.6.2007 31.12.2006*
Equity attributable to equity
holders of the parent 1,073.0 1,069.9
Minority interest 13.1 12.6
Total equity 1,086.1 1,082.5
Non-current liabilities
Interest-bearing non-current 588.8 395.1
liabilities
Deferred tax liabilities 114.3 105.9
Pension liabilities 67.1 66.8
Provisions 23.9 63.3
Total non-current liabilities 794.1 631.1
Current liabilities
Interest-bearing current liabilities 540.8 508.5
Interest-free current liabilities 506.0 522.9
Provisions 13.1 15.5
Total current liabilities 1,059.9 1,046.9
Liabilities directly associated with non-current
assets classified as held for sale 8.9
Total liabilities 1,854.0 1,686.9
Total equity and liabilities 2,940.1 2,769.4
Non-current assets held for sale include US- and Canada-based factory sites.
* Prior year correction included
CONSOLIDATED CASH FLOW STATEMENT 1-6/2007 1-6/2006 2006
EUR million
Cash flows from operating
activities
Adjusted operating profit 166.1 138.9 232.0
Interests -15.1 -15.2 -30.4
Dividend income 0.1 1.8 2.0
Other financing items 0.5 -1.3
Income taxes paid -19.5 -17.9 -45.1
Total funds from operations 131.6 108.1 157.2
Change in net working -108.5 -79.8 59.6
capital
Total cash flows from operating 23.1 28.3 216.8
activities
Cash flows from investing
activities
Capital expenditure -165.7 -161.8 -462.0
Proceeds from sale of -26.0 33.8 102.9
assets
Net cash used in -191.7 -128.0 -359.1
investing activities
Cash flow after investing -168.6 -99.7 -142.3
activities
Cash flows from financing
activities
Change in long-term loans
(increase +, decrease -6.7 43.8 173.4
-)
Change in long-term loan receivables
(decrease +, increase 0.7 0.7 1.5
-)
Short-term financing, net
(increase +, decrease 216.5 139.6 33.8
-)
Dividends paid -59.9 -45.1 -46.3
Other 4.0 14.7 -0.2
Net cash used in financing 154.6 153.7 162.2
activities
Net change in cash and cash equivalents -14.0 54.0 19.9
Cash and cash equivalents at end of 62.2 110.3 76.2
period
Cash and cash equivalents at
beginning of period 76.2 56.3 56.3
Net change in cash and cash equivalents -14.0 54.0 19.9
4-6/2007 4-6/2006
Cash flows from operating
activities
Adjusted operating profit 84.5 79.4
Interests -9.5 -9.1
Dividend income 0.1 0.9
Other financing items -1.1
Income taxes paid -11.7 -7.3
Total funds from operations 63.4 62.8
Change in net working -10.3 -14.2
capital
Total cash flows from operating 53.1 48.6
activities
Cash flows from investing
activities
Capital expenditure -87.4 -104.3
Proceeds from sale of 6.5 27.8
assets
Net cash used in -80.9 -76.5
investing activities
Cash flow after investing -27.8 -27.9
activities
Cash flows from financing
activities
Change in long-term loans
(increase +, decrease -125.6 -4.3
-)
Change in long-term loan receivables
(decrease +, increase -0.7
-)
Short-term financing, net
(increase +, decrease 216.5 65.5
-)
Dividends paid -59.9 -45.1
Other 3.2 14.1
Net cash used in financing 33.5 30.2
activities
Net change in cash and cash equivalents 5.7 2.3
Cash and cash equivalents at end of 62.2 110.3
period
Cash and cash equivalents at beginning of period 56.5 108.0
Net change in cash and cash equivalents 5.7 2.3
STATEMENT OF CHANGES IN EQUITY
Capital
paid-in
in
Share Share excess of Other Fair value
capital issue par value reserves reserve
Shareholders' equity at
January 1, 2006 221.3 0.0 257.8 2.8 64.3
Net profit for the
financial year
Dividends paid
Treasury shares issued
to target group
Share-based compensation
Options subscribed 0.2 0.1
for shares
Exchange differences
Hedge of net investments
in foreign entities
Cash flow hedging: amount
entered in shareholders' 10.7
equity
Acquired minority interest
Transfer between restricted
and
non-restricted equity 0.3
Other changes
Shareholders' equity at
June 30, 2006 221.5 0.1 257.8 3.1 75.0
Shareholders' equity at
January 1, 2007 221.6 0.0 257.9 3.1 59.6
Net profit for the
financial year
Dividends paid
Treasury shares issued
to target group
Share-based compensation
Options subscribed 0.2
for shares
Exchange differences 0.1
Hedge of net investments
in foreign entities
Cash flow hedging: amount
entered in shareholders' -0.3
equity
Acquired minority interest
Transfer between restricted
and
non-restricted equity
Other changes 0.3
Shareholders' equity at
June 30, 2007 221.8 0.0 257.9 3.5 59.3
Exchange Treasury Retained Minority
differences shares earnings interests Total
Shareholders' equity at
January 1, 2006 -33.9 -27.5 520.7 13.7 1,019.2
Net profit for the 56.8 1.8 58.6
financial year
Dividends paid -43.5 -1.5 -45.0
Treasury shares issued
to target group 0.7 -0.7 0.0
Share-based compensation 0.6 0.6
Options subscribed 0.3
for shares
Exchange differences -3.8 -0.1 -3.9
Hedge of net investments
in foreign entities 3.8 3.8
Cash flow hedging: amount
entered in shareholders' 10.7
equity
Acquired minority interest -0.5 -0.5
Transfer between restricted
and
non-restricted equity -0.3 0.0
Other changes -0.8 -0.1 -0.9
Shareholders' equity at
June 30, 2006 -33.9 -26.8 532.8 13.3 1,042.9
Shareholders' equity at
January 1, 2007 -30.8 -26.8 585.3 12.6 1082.5
Net profit for the 58.7 1.9 60.6
financial year
Dividends paid -58.2 -1.7 -59.9
Treasury shares issued
to target group 0.9 -0.9 0.0
Share-based compensation 0.8 0.8
Options subscribed 0.2
for shares
Exchange differences -1.6 0.2 -1.3
Hedge of net investments
in foreign entities 2.8 2.8
Cash flow hedging: amount
entered in shareholders' -0.3
equity
Acquired minority interest 0.2 0.2
Transfer between restricted
and
non-restricted equity 0.0
Other changes 0.4 -0.1 0.6
Shareholders' equity at
June 30, 2007 -29.6 -25.9 586.1 13.1 1,086.2
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 15,341 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 3,850,868 of its treasury shares at June
30, 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 6.8 million.
KEY FIGURES 1-6/2007 1-6/2006 2006*
Earnings per share, basic and 0.48 0.47 0.90
diluted, EUR
Cash flow from operations per 0.19 0.23 1.79
share, EUR
Capital expenditure, 165.7 161.8 462.0
EUR million
Capital expenditure / 11.6 13.5 18.3
revenue, %
Average number of shares 121,136 120,817 120,877
(1000), basic *)
Average number of shares 121,195 121,030 121,051
(1000), diluted *)
Number of shares at the end of the
period
(1000), basic *) 121,194 120,911 120,988
Number of shares at the end of the
period
(1000), diluted *) 121,194 121,040 121,204
Equity per share, attributable to
equity holders of the 8.86 8.52 8.85
parent, EUR
Equity ratio, % 37.1 39.7 39.2
Gearing, % 98.3 73.9 76.4
Net liabilities, EUR 1,067.4 770.2 827.4
million
Personnel (average) 9,826 8,949 9,186
4-6/2007 4-6/2006
Earnings per share, basic and 0.27 0.26
diluted, EUR
Cash flow from operations per 0.44 0.40
share, EUR
Capital expenditure, 87.4 104.3
EUR million
Capital expenditure / 11.6 16.1
revenue, %
Average number of shares 121,180 120,876
(1000), basic *)
Average number of shares 121,195 121,032
(1000), diluted *)
Number of shares at the end of the
period
(1000), basic *) 121,194 120,911
Number of shares at the end of the
period
(1000), diluted *) 121,194 121,040
*) Number of shares outstanding, adjusted by the number of
shares bought back.
REVENUE BY BUSINESS 4-6/2007 4-6/2006 1-6/2007 1-6/2006 2006*
AREA
EUR million
Kemira Pulp&Paper 260.1 257.9 515.4 467.4 993.3
Kemira Water 185.1 102.1 355.1 194.4 467.6
Kemira Specialty 110.6 107.6 214.1 226.2 456.2
Kemira Coatings 188.7 170.3 324.5 288.9 562.8
Other and Intra-Group 8.5 9.6 17.2 23.5 42.6
sales
Total Group 753.0 647.5 1,426.3 1,200.4 2,522.5
OPERATING PROFIT BY 4-6/2007 4-6/2006 1-6/2007 1-6/2006 2006*
BUSINESS AREA
Kemira Pulp&Paper 23.4 20.4 46.4 46.4 90.8
Kemira Water 13.0 9.6 24.9 16.0 35.3
Kemira Specialty 7.1 11.7 17.4 23.0 45.8
Kemira Coatings 27.3 25.0 40.1 34.6 72.1
Other and -13.2 -15.2 -22.3 -23.0 -50.3
eliminations
Total Group 57.6 51.5 106.5 97.0 193.7
CHANGES IN PROPERTY, PLANT AND 1-6/2007 1-6/2006 2006
EQUIPMENT
EUR million
Carrying amount at 987.1 865.0 865.0
beginning of year
Acquisitions of -14.4 27.1 151.9
subsidiaries
Increases 105.3 61.1 154.4
Decreases -3.1 -3.0 -42.0
Depreciation and -55.7 -51.4 -106.3
impairments
Exchange rate differences and -11.1 -57.6 -35.9
other changes
Net carrying amount 1,008.1 841.2 987.1
at end of period
CHANGES IN INTANGIBLE ASSETS 1-6/2007 1-6/2006 2006
EUR million
Carrying amount at 689.9 629.7 629.7
beginning of year
Acquisitions of 42.2 39.5 71.8
subsidiaries
Increases 14.7 6.1 18.1
Decreases -0.3 0.0 -0.4
Depreciation and -10.3 -8.0 -17.2
impairments
Exchange rate differences and 10.8 -9.2 -12.1
other changes
Net carrying amount 747.0 658.1 689.9
at end of period
CONTINGENT 30.6.2007 31.12.2006
LIABILITIES
EUR million
Mortgages 61.5 64.8
Assets pledged
On behalf of own 17.6 19.5
commitments
Guarantees
On behalf of own 12.2 6.4
commitments
On behalf of 34.3 32.6
associates
On behalf of others 3.4 1.4
Operating leasing
liabilities
Maturity within one 14.4 14.9
year
Maturity after one 113.5 118.1
year
Other obligations
On behalf of own 0.3 0.4
commitments
On behalf of 2.3 2.3
associates
Major off-balance sheet investment commitments
Major amounts of contractual commitments for the acquisition
of property, plant and equipment on June 30, 2007 were EUR 33 million
for
the construction of the chemical plant in Uruguay and EUR 13 million
for the investment of Kemira Coatings in Russia.
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 INSTRUMENTS
EUR million
30.6.2007 31.12.2006
Nominal Nominal
value Fair value value Fair value
Currency instruments
Forward contracts 327.8 3.2 389.4 5.5
of which hedges of
net investment
in a foreign 19.6 2.2
operation
Currency options
Bought 37.4 -0.1 42.8
Sold 39.5 0.1 45.3 0.2
Currency swaps 150.0 5.4 115.9 8.4
Interest rate
instruments
Interest rate swaps 117.6 5.7 109.2 4.7
of which cash flow 92.8 5.2 83.8 4.2
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 value Fair value
Electricity forward
contracts GWh 924.2 8.9 GWh 1,227.0 10.4
of which cash flow
hedge GWh 924.2 8.9 GWh 1,227.0 10.4
Propane swap
contracts Tons Tons 1,000.0 -0.1
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 the fair 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 3.2 million June 30, 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 July 1 and ending on September 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 June 30, 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.
Carrying
Fair values amounts
recorded on prior
business to business
combination combination
Intangible assets 15.5
Property, plant and 91.0 54.7
equipment
Inventories 35.0 33.3
Trade receivables and 34.9 34.9
other receivables
Cash and cash 0.3 0.3
equivalents
Total assets 176.7 123.2
Interest bearing current
liabilities
Other liabilities 12.9 12.8
Deferred tax liabilities 1.8
Total liabilities 14.7 12.8
Net assets 162.0 110.4
Cost of business 197.3
combination (net)
Goodwill 35.3
Acquisition cost 197.3
Overseas units -12.5
Cash and cash equivalents -0.3
in subsidiary acquired
Cash outflow on 184.5
acquisition
The revenue of the acquired unit for January 1 - June
30, 2007
totaled EUR 143.9 million and operating profit EUR
5.5 million.
DEFINITIONS OF KEY
FIGURES
Earnings per share Equity ratio, %:
(EPS):
Net profit attributable to Shareholders' equity x 100 /
equity
holders of the parent / Total assets - prepayments
Average number of shares received
Cash flow from Gearing, %:
operations:
Cash flow from operations, Interest-bearing net liabilities x 100
after /
change in net working Shareholders' equity
capital
and before investing
activities
Cash flow from operations Net liabilities:
per share:
Cash flow from operations Liabilities - bank and cash -
/
Average number of shares money market investments
Equity per share: Return on capital employed
Equity attributable to (ROCE), %:
equity
holders of the parent at Operating profit + share
end of quarter / of associates'
Number of shares at results x 100 /
end of quarter (Net working capital + property, plant and equipment
available for use + intangible
assets + investments in
associates) *)
*) Average
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 STATEMENT Reported Corrected
EUR million 2006 2 006
Revenue 2,522.5 2,522.5
Other income from 59.2 59.2
operations
Expenses -2,256.5 -2,264.5
Depreciation -123.5 -123.5
Operating profit 201.7 193.7
Financial income and -37.2 -37.2
expenses
Income from associates -2.3 -2.3
Profit before tax 162.2 154.2
Income tax -42.0 -42.0
Net profit for the 120.2 112.2
period
Attributable to:
Equity holders of the 116.6 108.6
parent
Minority interest 3.6 3.6
Net profit for the 120.2 112.2
period
KEY FIGURES Reported Corrected
2006 2 006
Earnings per share, basic
and diluted, EUR 0.96 0.90
BALANCE SHEET Reported Corrected
EUR million ######## 31.12.2006
Equity attributable to equity
holders of the parent 1,077.9 1,069.9
Total equity 1,090.5 1,082.5
Provisions 55.3 63.3
Total non-current 623.1 631.1
liabilities
Retrospective restated quarterly figures are presented
as appendix to this interim report.
QUARTERLY EARNINGS PERFORMANCE
2006
(Unaudited figures) 1-3 4-6 7-9 10-12 Total
Revenue
Kemira Pulp&Paper 209.5 257.9 261.9 264.0 993.3
Kemira Water 92.3 102.1 101.7 171.5 467.6
Kemira Speciality 118.6 107.6 112.8 117.2 456.2
Kemira Coatings 118.6 170.3 164.6 109.3 562.8
Other and intra-Group
sales 13.9 9.6 11.6 7.5 42.6
Total 552.9 647.5 652.6 669.5 2,522.5
Operating profit
Kemira Pulp&Paper 26.0 20.4 24.3 20.1 90.8
Kemira Water 6.4 9.6 9.0 10.3 35.3
Kemira Speciality 11.3 11.7 11.7 11.1 45.8
Kemira Coatings 9.6 25.0 39.0 -1.5 72.1
Other including
eliminations -7.8 -15.2 -8.9 -18.4 -50.3
Total 45.5 51.5 75.1 21.6 193.7
Financial income
and expenses -7.1 -5.8 -11.6 -12.7 -37.2
Share of associates'
results -0.9 -0.6 0.3 -1.1 -2.3
Profit before tax 37.5 45.1 63.8 7.8 154.2
Income tax -10.9 -13.1 -17.9 -0.1 -42.0
Net Profit 26.6 32.0 45.9 7.7 112.2
Attributable to
Equity holders
of the parent 25.8 31.0 45.0 6.8 108.6
Minority interests 0.8 1.0 0.9 0.9 3.6
Net Profit 26.6 32.0 45.9 7.7 112.2
Earnings per share,
diluted, EUR 0.21 0.26 0.37 0.12 0.90
Capital employed, rolling 1,876.6
ROCE, % 10.2 %
For further information, please contact:
Kemira Oyj
Timo Leppä, Executive Vice President, Group Communications
Tel. +358 (0)10 862 1700
Kemira Oyj
Andreas Langhoff, Investor Relations Manager
Tel. +358 (0)10 862 1140
Kemira will hold a press conference on its January-June 2007 results
for the media and analysts at its head office (Porkkalankatu 3)
today, starting at 10:30am. A conference call in English will be held
at 1:00pm. 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.
Kemira Group Interim Report, January-June 2007: KEMIRA S REVENUE UP BY 16% IN Q2
| Source: Kemira Oyj
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