Kemira Oyj
Half-year Financial Report
July 20, 2017 at 2.30 pm (CET+1)
Kemira Oyj's Half-year Financial Report 2017: Solid revenue growth, profitability below prior-year level
This is a summary of the January - June 2017 Half-year Financial Report. The complete January - June 2017 Half-year Financial Report with tables is attached to this release and available at www.kemira.com/investors.
Second quarter:
- Revenue increased 5% and was EUR 617.2 million (587.8) as the good volume growth both in Industry & Water and Pulp & Paper continued. Revenue in local currencies, excluding acquisitions and divestments, increased 4%.
- Operative EBITDA decreased 2% to EUR 77.1 million (78.9) mainly due to higher variable costs, despite sales volume growth and stabilizing sales prices. Operative EBITDA margin declined to 12.5% (13.4%).
- EPS decreased to EUR 0.12 (0.17) mainly due to a EUR 5 million capital gain recorded in Q2 2016.
January-June
- Revenue increased 5% to EUR 1,227.3 million (1,170.5) due to volume growth in North American oil and gas business in Industry & Water segment. Revenue in local currencies, excluding acquisitions and divestments, increased 3%.
- Operative EBITDA decreased 4% to EUR 146.1 million (151.7) as a result of higher variable costs and lower sales prices. Operative EBITDA margin declined to 11.9% (13.0%).
- EPS decreased to EUR 0.24 (0.33) mainly due to lower EBITDA and a EUR 5 million capital gain recorded in 2016.
Outlook for 2017 (unchanged)
Kemira expects its operative EBITDA to increase from the prior year (2016: EUR 302.5 million).
Kemira's President and CEO Jari Rosendal:
"In the second quarter, revenue growth continued. Organic revenue growth was 4%, which is a good achievement. Profitability was below the prior-year level due to higher variable costs. During the quarter, Oil & Mining and Municipal & Industrial merged into a new segment Industry & Water. At the same time, Group's overall structures were streamlined leading to fewer layers of management and increased span of control. The actions are expected to generate savings of EUR 15-20 million with a full run-rate by the end of 2017.
In Pulp & Paper, sales volumes continued to grow. We lost revenue due to force majeure at Huntsman (now Venator) in Pori, Finland, but the underlying revenue generation is developing according to plan. A major contract manufacturing agreement with AkzoNobel in China ended during Q2, and the two remaining ones in Europe will end in Q3 and Q4 leading to a step-up in synergies in the second half of the year. Our chlorate capacity investment in Joutseno has been granted all required permits and the site is expected to be operational during Q4.
Industry & Water generated organic growth of 9% driven by strong sales volume development in the North American oil & gas business. However, the profitability level was unsatisfactory as the first quarter's spike in feedstock prices, particularly in North America, impacted variable costs negatively. In water treatment business, volume growth continued.
We continue to execute our strategy. Our new organizational structure is effective as of June 1 and the operational excellence program BOOST is progressing with a roll-out of logistics' management in North America. Despite the Group's lower profitability in the first half, I am confident that due to improvement actions already ongoing, the second half will be better than last year's."
KEY FIGURES AND RATIOS
| EUR million | Apr-Jun 2017 | Apr-Jun 2016 | Jan-Jun 2017 | Jan-Jun 2016 | Jan-Dec 2016 |
| Revenue | 617.2 | 587.8 | 1,227.3 | 1,170.5 | 2,363.3 |
| Operative EBITDA | 77.1 | 78.9 | 146.1 | 151.7 | 302.5 |
| Operative EBITDA, % | 12.5 | 13.4 | 11.9 | 13.0 | 12.8 |
| EBITDA | 67.0 | 69.3 | 133.7 | 140.4 | 284.2 |
| EBITDA, % | 10.9 | 11.8 | 10.9 | 12.0 | 12.0 |
| Operative EBIT | 43.6 | 46.6 | 78.6 | 87.5 | 170.1 |
| Operative EBIT, % | 7.1 | 7.9 | 6.4 | 7.5 | 7.2 |
| EBIT | 33.5 | 34.9 | 66.2 | 74.1 | 147.0 |
| EBIT, % | 5.4 | 5.9 | 5.4 | 6.3 | 6.2 |
| Finance costs, net | -7.7 | -0.3 | -14.4 | -6.3 | -19.1 |
| Profit before taxes | 25.9 | 34.6 | 51.9 | 67.9 | 128.0 |
| Net profit for the period | 19.6 | 26.7 | 39.4 | 52.4 | 97.9 |
| Earnings per share, EUR | 0.12 | 0.17 | 0.24 | 0.33 | 0.60 |
| Capital employed* | 1,749.7 | 1,709.6 | 1,749.7 | 1,709.6 | 1,718.2 |
| Operative ROCE* | 9.2 | 9.8 | 9.2 | 9.8 | 9.9 |
| ROCE*, % | 8.0 | 7.9 | 8.0 | 7.9 | 8.6 |
| Cash flow from operating activities | 28.6 | 57.0 | 40.8 | 83.2 | 270.6 |
| Capital expenditure excl. acquisition | 45.2 | 43.3 | 82.1 | 74.7 | 212.6 |
| Capital expenditure | 45.2 | 43.3 | 82.1 | 72.8 | 210.6 |
| Cash flow after investing activites | -16.5 | 49.8 | -41.1 | 47.5 | 97.8 |
| Equity ratio, % at period-end | 43 | 44 | 43 | 44 | 45 |
| Equity per share, EUR | 7.18 | 7.30 | 7.18 | 7.30 | 7.68 |
| Gearing, % at period-end | 69 | 61 | 69 | 61 | 54 |
| Personnel at period-end | 4,849 | 4,873 | 4,849 | 4,873 | 4,818 |
*12-month rolling average (ROCE, % based on the EBIT)
Kemira provides certain financial performance measures (alternative performance measures) on non-GAAP basis. Kemira believes that alternative performance measures, like operative EBITDA and operative EBIT, followed by Kemira management, provide useful and more comparable information of its operative business performance.
Kemira's alternative performance measures should not be viewed in isolation to the equivalent IFRS measures and alternative performance measures should be read in conjunction with the most directly comparable IFRS measures. Definitions of the alternative performance measures can be found in the Definitions of the key figures in this report, as well as at www.kemira.com >Investors > Financial information.
All the figures in this interim report have been individually rounded and consequently the sum of individual figures can deviate from the presented sum figure
OUTLOOK FOR 2017 (UNCHANGED)
Kemira expects its operative EBITDA to increase from the prior year (2016: EUR 302.5 million).
MID- AND LONG-TERM FINANCIAL TARGETS (UNCHANGED)
Kemira aims at above-the-market revenue growth with operative EBITDA margin of 14-16%. The gearing target is below 60%.
Helsinki, July 20, 2017
Kemira Oyj
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.
FINANCIAL CALENDAR 2017 AND 2018
Interim Report January-September 2017 October 25, 2017
Financial Statements Bulletin 2017 February 8, 2018
Interim Report January-March 2018 April 27, 2018
Half-year Financial Report January-June 2018 July 20, 2018
Interim Report January-September 2018 October 24, 2018
Capital Markets Day will be held in London on September 21, 2017.
Press and analyst conference call
Kemira will arrange a press conference for the analysts, investors, and media on July 20, 2017 starting at 4.00 p.m. (2 p.m. UK time) at GLO Hotel Kluuvi, Kluuvikatu 4, 2nd Floor, Helsinki. During the conference, Kemira's President and CEO Jari Rosendal and CFO Petri Castrén will present the results. The press conference will be held in English and will be webcasted at www.kemira.com/investors. The presentation material and the webcast recording will be available on the abovementioned company website.
You can attend the Q&A session via a conference call. In order to participate in the conference, please call ten minutes before the conference begins:
FI +358 9 7479 0361
SE +46 8 5033 6574
UK +44 330 336 9105
US +1 719 325 2202
Conference ID: 8255317
For more information, please contact:
Kemira Oyj
Olli Turunen, Vice President, Investor Relations
Tel. +358 10 862 1255
Kemira is a global chemicals company serving customers in water-intensive industries. We provide expertise, application know-how and chemicals that improve our customers' product quality, process and resource efficiency. Our focus is on pulp & paper, oil & gas and water treatment. In 2016, Kemira had annual revenue of around EUR 2.4 billion and 4,800 employees. Kemira shares are listed on the Nasdaq Helsinki Ltd.
www.kemira.com
