Kemira Oyj
Stock Exchange Release
July 22, 2014 at 2.30 pm (CET+1)
This is a summary of the January-June 2014 Interim report. The complete January-
June 2014 Interim report with tables is attached to this release and available at www.kemira.com/investors.
Second quarter:
- Reported revenue decreased 9% to EUR 518.2 million (569.3), due to divestments and unfavorable currency exchange rates. Revenue in local currencies, excluding acquisitions and divestments, remained flat.
- Operative EBIT decreased 8% to EUR 37.0 million (40.0) with a margin of 7.1% (7.0%). Operative EBIT in local currencies, excluding acquisitions and divestments remained flat.
- On July 7, Kemira signed a preliminary agreement to acquire AkzoNobel's paper chemical business.
January-June:
- Reported revenue decreased 7% to EUR 1,048.1 million (1,130.2), due to divestments and unfavorable currency exchange rates. Organic revenue growth reached 1%.
- Operative EBIT decreased 11% to EUR 73.3 million (82.2) with a margin of 7.0% (7.3%).
- Operative EBITDA decreased 6% to EUR 117.7 million (125.0) with a margin of 11.2% (11.1%).
- Operative earnings per share were EUR 0.29 (0.31).
- Kemira maintains its revenue outlook for 2014, but revises its profitability outlook. Kemira starts to apply operative EBITDA as its profitability metric (previously: operative EBIT) for 2014 outlook. Kemira expects operative EBITDA in 2014 to be approximately at the same level as in 2013 (previously: operative EBIT was expected to be slightly higher in 2014 as in 2013). This change from EBIT to EBITDA guidance is consistent with Kemira's earlier communicated operative EBITDA margin target and also consistent with the chemical industry practice. Detailed definition in the outlook chapter.
Kemira's President and CEO Jari Rosendal:
Recent divestments and unfavorable currency exchange rate fluctuations continued to impact Kemira's reported revenue. Revenue in local currencies, excluding acquisitions and divestments remained flat with modest sales volume growth. Paper and Oil & Mining sales volumes continued to grow at above-the-market rate. However, increased competition in Municipal & Industrial and our actions to improve segment's profitability continued to impact sales volumes negatively.
Operative EBIT decreased 8% with somewhat higher margin. The main reasons for the decline, in addition to the unfavorable currency exchange rates, were the divestment of formic acid business as well as the increased depreciation related to the ramp up of our new manufacturing facilities in Nanjing and Dormagen, and amortization related to our recent acquisitions. We expect benefits of these investments to start to become more visible in the second half of 2014.
Kemira's strategic choices presented in April 2013 remain intact. We focus on the development, application expertise, and supply of chemicals for pulp & paper, oil & gas, mining and water treatment. In order to gain a stronger position in the selected markets and to accelerate organic growth, we will invest into new, and expand our present manufacturing capacity with new and improved technologies. Going forward, we will also increase R&D investments for innovations to improve our customers processes.
We are also actively evaluating inorganic growth opportunities. In the beginning of July 2014, we announced a preliminary agreement to acquire AkzoNobel's paper chemical business. It is a great fit for Kemira as it fulfills our acquisition criteria by strengthening our market position and technological capabilities. In addition, we expect to achieve significant synergies with this acquisition. The transaction is expected to close during the first quarter of 2015.
Efficiency and continuous profitability improvement remain our top priorities and are the key enablers for successful strategy implementation.
KEY FIGURES AND RATIOS
| EUR million | Apr-Jun 2014 | Apr-Jun 2013 | Jan-Jun 2014 | Jan-Jun 2013 | Jan-Dec 2013 |
| Revenue | 518.2 | 569.3 | 1,048.1 | 1,130.2 | 2,229.1 |
| Operative EBITDA | 60.2 | 61.5 | 117.7 | 125.0 | 251.9 |
| Operative EBITDA, % | 11.6 | 10.8 | 11.2 | 11.1 | 11.3 |
| EBITDA | 34.9 | 41.6 | 112.6 | 102.7 | 141.9 |
| EBITDA, % | 6.7 | 7.3 | 10.7 | 9.1 | 6.4 |
| Operative EBIT | 37.0 | 40.0 | 73.3 | 82.2 | 164.2 |
| Operative EBIT, % | 7.1 | 7.0 | 7.0 | 7.3 | 7.4 |
| EBIT | 10.0 | 13.3 | 64.3 | 52.5 | 42.6 |
| EBIT, % | 1.9 | 2.3 | 6.1 | 4.6 | 1.9 |
| Share of profit or loss of associates | 0.0 | 0.1 | 0.0 | -1.1 | -1.1 |
| Financing income and expenses | -8.5 | -4.2 | -13.8 | -28.9 | -39.0 |
| Profit before tax | 1.5 | 9.2 | 50.5 | 22.5 | 2.5 |
| Net profit | 1.8 | 3.7 | 44.9 | 6.5 | -25.9 |
| Earnings per share, EUR | 0.00 | 0.02 | 0.28 | 0.03 | -0.21 |
| Operative earnings per share, EUR | 0.14 | 0.14 | 0.29 | 0.31 | 0.70 |
| Capital employed* | 1,306.6 | 1,505.1 | 1,306.6 | 1,505.1 | 1,366.5 |
| Operative ROCE* | 11.9 | 10.4 | 11.9 | 10.4 | 11.9 |
| ROCE* | 4.2 | 0.6 | 4.2 | 0.6 | 3.0 |
| Capital expenditure | 34.0 | 30.9 | 59.6 | 59.9 | 197.5 |
| Cash flow after investing activities | -39.5 | 10.5 | 90.8 | 200.4 | 195.7 |
| Equity ratio, % at period-end | 49 | 51 | 49 | 51 | 51 |
| Gearing, % at period-end | 41 | 36 | 41 | 36 | 41 |
| Personnel at period-end | 4,296 | 4,664 | 4,296 | 4,664 | 4,453 |
*12-month rolling average (ROCE, % based on the reported EBIT)
Definitions of key figures are available at www.kemira.com > Investors > Financial information. Comparative 2013 figures are provided in parentheses for some financial results, where appropriate. Operative EBITDA, operative EBIT, operative earnings per share and operative ROCE are excluding non-recurring items.
KEMIRA'S FINANCIAL TARGETS for 2016 (unchanged) AND OUTLOOK 2014 (updated)
Kemira will continue to focus on improving its profitability and reinforcing positive cash flow. The company will also continue to invest in order to secure future growth in the water quality and quantity management business.
The company's financial targets for 2016 are:
- revenue EUR 2.6-2.7 billion
- EBITDA-% of revenue 15%
- gearing level < 60%.
In addition, Kemira expects its medium-term operating tax rate to be in the range of 22%-24%. The operating tax rate excludes non-recurring items and the impact of the income from associated companies.
The basis for growth is the expanding market for chemicals related to water quality and quantity management and Kemira's strong expertise in this field. The need to increase operational efficiency in our customer industries creates opportunities for Kemira to develop new products and services for both current and new customers. Research and Development is a critical organic growth enabler for Kemira and it provides differentiation capabilities in the water quality and quantity management markets. Kemira will invest in innovation, technical expertise, and competencies in the targeted focus areas.
Outlook (revised from the Interim Report January-March 2014)
Revised outlook: In 2014, Kemira expects its revenue in local currencies and excluding acquisitionsand divestments to be slightly higher than in 2013 and its operative EBITDA to be approximately at the same level as in 2013.
Previous outlook: In 2014, Kemira expects its revenue in local currencies and excluding acquisitions and divestments to be slightly higher than in 2013 and its operative EBIT to be higher than in 2013.
The guidance for 2014 is defined as follows:
| Kemira guidance | Definition |
| Approximately at the same level | from -5% to 5% |
| Slightly higher/lower | from 0% to 5% or from 0% to -5% |
| Higher/lower | from 5% to 15% or from -5% to -15% |
| Significantly higher/lower | more than 15% or less than -15% |
Helsinki, July 22, 2014
Kemira Oyj
Board of Directors
FINANCIAL CALENDAR 2014 AND 2015
Interim Report January-September 2014 October 22, 2014
Financial results for the year 2014 February 10, 2015
Interim Report January-March 2015 April 24, 2015
Interim Report January-June 2015 July 22, 2015
Interim Report January-September 2015 October 23, 2015
Kemira Capital Markets Day will be held in London on September 9, 2014.
Kemira Oyj's Annual Report 2014 will be published the week starting on February 23, 2015.
The Annual General Meeting is scheduled for Monday, March 23, 2015 at 1.00 pm (CET+1). The Board of Directors of the company will convene the meeting.
Press and analyst conference and conference call
Kemira will arrange a press conference for analysts and the media starting at 3.30 pm (1.30 pm UK time) at Kemira House, Porkkalankatu 3, Helsinki. In the conference, Kemira's President and CEO Jari Rosendal and the CFO Petri Castrén will present the Q2 2014 results. The press conference will be held in English and will be webcasted at www.kemira.com/investors. Webcast will be available at www.kemira.com/investors also after the event. Presentation material will be available on Kemira's website at www.kemira.com/investors under Investors in English and at www.kemira.com/fi/sijoittajat in Finnish at about 3.00 pm.
Conference call in connection to the press and analyst conference
You can also listen to the conference live over the phone and attend the Q&A session via a conference call. In order to participate in the call, please dial ten minutes before the conference begins:
FI: +358 9 817 10465
SE: +46 85 1999355
UK: +44 20 31940550
US: +1 855 2692605
No PIN code requested.
For more information, please contact
Kemira Oyj
Tero Huovinen, VP, Investor Relations
+358 10 862 1980
Kemira is a global chemicals company serving customers in water-intensive industries. We provide expertise and chemicals that improve our customers' water, energy and raw material efficiency. Our focus is on pulp & paper, oil & gas, mining and water treatment. In 2013, Kemira had annual revenue of EUR 2.2 billion and around 4,500 employees. Kemira shares are listed on the NASDAQ OMX Helsinki Ltd. www.kemira.com
