Creating value where water meets chemistry
Kemira credit investor presentation
Petri Castrén | May, 2015
Creating value where water meets chemistry Disclaimer This - - PowerPoint PPT Presentation
Petri Castrn | May, 2015 Kemira credit investor presentation Creating value where water meets chemistry Disclaimer This presentation contains, or may be deemed to contain, forward-looking statements. These statements relate to future events
Petri Castrén | May, 2015
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This presentation contains, or may be deemed to contain, forward-looking statements. These statements relate to future events or our future financial performance, including, but not limited to, strategic plans, potential growth, planned operational changes, expected capital expenditures and future cash sources and requirements, that involve known and unknown risks, uncertainties and other factors that may cause Kemira Oyj’s or its businesses’ actual results of operations, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking
“plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of those terms or other comparable terminology. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not
possibly to a material degree. All forward-looking statements made in this presentation are based on information presently available to management and Kemira Oyj assumes no obligation to update any forward-looking statements, unless obligated to do so under applicable law or regulation. It is expected that each potential investor is acting for its own account, and it will make its own independent decisions to enter into any transaction and as to whether any transaction is appropriate or proper for it based upon its own judgment. The potential investor shall make its own evaluations, calculations, appraisal of the financial structure and financial outcome, credit analysis or any other evaluation (inter alia tax consideration) and the party shall make its
explanation of Danske Bank, SEB and/or Kemira as an advice or as a recommendation to enter into any transaction. No communication (written or oral) received from any of Danske Bank, SEB and Kemira shall be deemed to be an assurance or guarantee as to the expected results of any transaction. The information may not be used or reproduced, in whole or in part, for any other purpose, nor be furnished nor distributed to any persons other than those to whom copies of this information package have been delivered by any of Danske Bank, SEB and Kemira. Further, the distribution of any information in this presentation, and the offer, sale and delivery of the securities described herein in certain jurisdictions may be restricted by law. There shall be no sale of these securities in any state or jurisdiction in which an offer, solicitation or sale would be unlawful prior to qualification under the securities laws of such state or jurisdiction. By electing to view this presentation, you represent and agree that you are not resident in the United States nor a US Person, as defined in Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), nor acting on behalf
Securities Act.
December 19, 2017 Kemira credit investor presentation 2015
Product quality or product yield
Process and energy efficiency 20% Water quality and regulatory compliance in raw water and wastewater treatment 30%
5 Kemira shares are listed on the NASDAQ OMX Helsinki stock exchange. December 19, 2017 Kemira credit investor presentation 2015
R&D and technology centers Employees O&M management Houston, USA Paper & M&I EMEA management Frankfurt, Germany KEMIRA HQ Helsinki, Finland EUROPE, MIDDLE EAST AND AFRICA 55% EUR 1,170 million 2,410 1,480 ASIA PACIFIC 6% EUR 120 million 350 Paper management Hong Kong Regional HQ Atlanta, USA Regional HQ Shanghai, China AMERICAS 39% EUR 850 million
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20 % 25 % 55 %
PAPER OIL & MINING MUNICIPAL & INDUSTRIAL
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19 % 27 % 54 %
December 19, 2017 Kemira credit investor presentation 2015
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Jari Rosendal President & CEO Petri Castrén CFO Mats Rönnbäck Paper (Interim) Antti Salminen Municipal & Industrial Tarjei Johansen Oil & Mining Heidi Fagerholm CTO Eeva Salonen HR Michael Löffelmann Projects & Manufacturing Technology Esa-Matti Puputti Operational Excellence (as of May 18, 2015)
Expertise We have unique expertise in applying chemicals and supporting pulp & paper producers to innovate and constantly improve their operational efficiency and end-product quality. Offering We develop and commercialize new products to fulfil customer needs and to ensure a leading portfolio for the pulp and paper industry.
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Packaging, board and tissue grades Paper grades Chemical, mechanical and recycled pulp
December 19, 2017 Kemira credit investor presentation 2015
Expertise We provide a unique combination of innovative chemicals and application knowledge that improves process efficiency and yield in oil, gas and metals recovery. Offering We use our in-depth understanding of extraction processes to tailor solutions for water management and re- use.
Oil & Gas and process additives applications Minerals & Metals applications
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December 19, 2017 Kemira credit investor presentation 2015
Kemira’s revenue split in oil and gas applications
Expertise We enable our customers to improve their water treatment efficiency by providing value adding support and high performing chemicals. Offering We are the only company that manufactures and supplies such a broad range of water treatment chemicals – both polymers and coagulants, as well as antiscalants, defoamers and water disinfectant.
Other Coagulants Polymers
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Telemaco Borba (BR) process chemical expansion Sodium Chlorate to Klabin (BR) Tarragona (ES) coagulant site Oulu (FI) pulp chemicals expansion Dry and emulsion polyacrylamide expansion (US) BASF AKD emulsion acquisition FennoBond capacity expansion (IT)
*) Transaction expected to close in Q2 2015
5/14 6/14 2014 Q4/14 1/14
Nanjing (CN) process chemical site Announced investments in 2014
7/14
AkzoNobel paper chemical acquisition* Pulp chemical deliveries to Montes del Plata (UY)
December 19, 2017 Kemira credit investor presentation 2015
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Application sales Production optimization Capacity expansion
Capacity increases driving bleaching and pulping Market share driving coagulants
Differentiated product lines Commodity product lines
%-of total revenue in Q1 2015 Polymers Sizing and strength Defoamers, dispersants, biocides and other process chemicals Coagulants Bleaching& Pulping chemicals Miscellaneous commodity products
Paper 11% 24% 14% 4% 37% 10% Oil & Mining 58%
3% 7% 7% Municipal & Industrial 22%
65% 3% 7% Kemira 22% 14% 13% 20% 23% 8%
December 19, 2017 Kemira credit investor presentation 2015
Paper, O&M and M&I O&M and Pulp & Paper Paper, O&M and M&I O&M (Middle East and Africa) Paper (China, Indonesia and South Korea)
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Strategic rationale
in all regions, especially in APAC
and technologies Expected revenues of more than EUR 200 million on an annualized basis (at closing) Closing expected in Q2 2015 Transaction is expected to result in EUR 15 million annual net synergies Transaction price EUR 153 million
Howard Moses Lake Chattanooga Kristinehamn Oulu Jundiai Mannheim Ambes Estella Soave Pasuruan Gunsan Suzhou Wellgrow Hallam Mount Maunganui
Production sites Contract manufacturing
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Continental Europe through customer contracts
personnel
SAP
Kemira’s own manufacturing network 6 months after closing
Kemira integration 3F polymers BASF AKD emulsion business
integrated polymer producer
business processes into SAP
already realized
rate even during integration period
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57% 48% 57% 43% 52% 43%
2012 2013 2014 Sodium chlorate project in Brazil Expansion Maintenance and improvement
134 135 136
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centers in Finland, China and the USA
INNOVATION INNOVATION REVENUE TARGET IS 10% (2014: 8%) OF TOTAL REVENUE BY 2016
12.1% 10.4%
2013 2014
Operative EBITDA margin
2013 2014
Revenue, EUR million
312
2013 2014
Revenue, EUR million
1,113 382 1,170 Paper
Oil & Mining
Municipal & Industrial
and polymer technologies
technological and business capabilities
*In emulsion and dry polyacrylamides
+5% +23%
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EUR million (except ratios) 2014 2013 2012 2011 2010 Revenue 2,137 2,229 2,241 2,207 2,161 EBITDA, excluding non-recurring items 253 252 249 253 259
11.8 11.3 11.1 11.5 12.0 Share of profit or loss of associates
11 31 9 Financing income and expenses 31 39 16 21 27 Capital expenditure, including M&A 145 198 134 201 107 Cash flow after capital expenditure 75 196 72 115 169 Cash flow return on capital invested (CFROI), % 4 10 8 8 6 Equity ratio, % 51 51 51 51 54 Gearing, % at period-end 42 41 42 38 39 Net debt 486 456 532 516 536
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EUR million (except ratios) Q1 2015 Q1 2014 % 2014 Revenue 553 530 4 2,137 Operative EBITDA 66.4 57.5 15 252.9
12.0 10.9
Operative EBIT 39.1 36.3 8 158.3
7.1 6.9
Share of profit or loss of associates 0.2 0.0
Financing income and expense
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Earnings per share, EUR 0.16 0.28
0.59 Capital expenditure, excluding M&A 27.0 25.6 5 136 Cash flow from the operating activities 42.4 13.1
Kemira Investor Presentation (updated on April 24, 2015) 25
9,3% 9,7% 10,2% 10,9% 10,8% 10,8% 10,7% 11,1% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2013 2014
*Rolling 12 months
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EUR million, expect ratios 2014* 2013* Revenue 2,136.7 2,229.1 Goodwill 476.7 520.8 Other intangible assets 75.6 63.5 Property, plant and equipment 664.3 656.8 Net Working Capital ratio 9.9% 10.9% Operative EBIT 158.3 164.2
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Net cash generated from operating activities Cash flow after investments
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EUR million
Revenue
Operative EBITDA Operative EBITDA margin Gearing EUR 2.7 billion 15%
EUR 253 million 11.8% 42% EUR 2.1 billion <60%
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Increase At the same level or increase
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Net debt, EUR million Net debt/
EBITDA
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December 19, 2017 Kemira credit investor presentation 2015
46% 29% 10% 3% 12%
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33
225 36 68 82 210 66
EUR million
Gross debt EUR 687 million, March 31, 2015
Kemira Investor Presentation (updated on April 24, 2015)
*) Rolling 12-month
126 687 1,156 Assets Liabilities Equity
2015 2016 2017 2018 2019 2020
December 19, 2017 Kemira Interim Report Q1 2015 34
Debt maturity profile, end of March, 2015
EUR million Cash and cash equivalents
Capital structure, end of March, 2015
EUR million Net debt, 562 million
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Indicative terms and conditions Issuer: Kemira Oyj Status: Senior unsecured Amount: EUR [100] million Maturity: [ ] May 2022 Coupon: [ ] Documentation: Stand-alone, Finnish law Covenants/Terms: Change of Control, Cross Default, Negative Pledge Issuer call option Par call 3 months prior to the Redemption Date Clearing: Euroclear Finland (Infinity) Listing: Nasdaq OMX, Helsinki Denominations: EUR 100,000 + 1,000 Bookrunners: Danske Bank and SEB
unsecured bond issue to extend debt maturity profile and to further diversify the funding sources
present and discuss the potential transaction with fixed income investors
be held during May 4 – 6
thereafter, subject to market conditions
million and the maturity under discussion is 7 years
December 19, 2017 Kemira credit investor presentation 2015
Coagulants (30) Bleaching and pulping (9) Polymers and
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South America APAC EMEA North America
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30% 35% 15% 20%
Logistics Other raw materials and trading goods
(caustic soda, fatty acid, aluminium hydrate, hydrochloric and sulphuric acid)
Oil direct + indirect
(Acrylonitrile, acrylic acid, Alpha Olefins, Sodium Chloride)
Electricity used in production and as a raw material
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20 40 60 80 100 120 140 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 2012 2013 2014 2015 Brent oil, USD Sales price* Variable costs*
*) 12-month rolling change vs previous year Kemira Investor Presentation (updated on April 24, 2015) 40
30% 35% 15% 20% Logistics Other raw materials and trading goods (caustic soda, fatty acid, aluminium hydrate, hydrochloric and sulphuric acid) Oil direct + indirect (Acrylonitrile, acrylic acid, Alpha Olefins, Sodium Chloride)
Kemira variable cost structure
Electricity used in production and as a raw material
Variable cost vs sales price trend
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Kemira revenue distribution 2014 Kemira cost distribution 2014
10% appreciation of our main foreign currencies against EUR would approximately have EUR 15 million impact on operative EBITDA
December 19, 2017 Kemira credit investor presentation 2015
EUR million Q1/2015 Q1/2014 % 2014 2013 % Revenue 314.6 280.4 12 1,170.0 1,112.8 5 Operative EBITDA 36.1 33.1 9 137.2 131.1 5
11.5 11.8
11.8
20.7 21.9
85.8 85.9
6.6 7.8
7.7
17.7 12.3 44 83.0 75.5 10 Cash flow 9.6
58.2
Kemira Investor Presentation (updated on April 24, 2015)
Ciba #1 AkzoNobel #2 BASF #3 Hercules #4
Nalco #6
BASF (paper) #2 AkzoNobel (pulp) #3 Solenis (paper) #4 Ecolab (paper) #5
*Including AkzoNobel paper chemicals acquisition
2.9 3.0 3.1 2.9 3.0 3.2 2.2 2.5 2.9 2014 2016 2020
APAC
CAGR
EMEA Americas
0.7% 1.9% 4.6%
Pulp and paper chemical relevant market growth estimate, EUR billion (CAGR: 2.4%)
Source: Management estimation based on various sources 44 December 19, 2017 Kemira credit investor presentation 2015
PAPER
Packaging and board Tissue Printing and writing Pulp
Sodium chlorate, Hydrogen peroxide, Polymers, Defoamers, Coagulants, Biocides, Sizing additives, Strength additives, Surface additives, Colorants,Sulfuric acid APPLICATIONS Pulping, Bleaching, Retention, Water quality management, Sizing, Strength, Surface treatment, Coloring, Deposit control, Microbiological growth control
and quality
needs
the whole process from pulping to coating ADVANTAGE
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EUR million Q1/2015 Q1/2015 % 2014 2013 % Revenue 93.9 92.0 2 382.2 311.5 23 Operative EBITDA 11.1 10.7 4 48.4 32.7 48
11.8 11.6
10.5
5.8 6.3
29.9 17.4 72
6.2 6.8
5.6
4.5 4.4 2 26.3 69.8
Cash flow 5.1 10.9
Kemira Investor Presentation (updated on April 24, 2015)
5.1 5.6 6.3 3.3 3.8 4.5 2014 2016 2020 CAGR 3.6% 4.8%
Oil, gas and mining chemical market growth estimate, EUR billion (CAGR: 4%)
EMEA Americas
Source: Management estimation based on various sources 47 December 19, 2017 Kemira credit investor presentation 2015
December 19, 2017 Kemira Interim Report Q1 2015 48
20 40 60 80 100 120 140 160 Jan Apr Jul Oct Jan Apr Jul Oct Jan 2013 2014 2015 Horizontal rig count and oil price (WTI) index Horizontal rig count in US Oil price (WTI)
OIL & MINING
Oil & Gas Upstream EOR Stimulation Production Drilling & cementing Oil sands Mining Iron ore Copper Gold PRODUCTS
Polymers, Dispersants & Antiscalants, Biocides, Emulsifiers, Defoamers, Coagulants
OIL & GAS APPLICATIONS
Friction reduction, Scale control, Microbial control, Drilling mud rheology control, Oil-based mud emulsification, EOR polymer flooding, Conformance control & Profile modification, SAGD water clarifiction and oil separation
MINING APPLICATIONS
Concentrate and tailings thickening, Rheology modification, Mineral slurry preservation, Scale control, Metal contaminant removal
VALUE
Improved:
regulation
ADVANTAGE
application knowledge
Kemira is 2nd largest manufacturer of polyacrylamides in the world
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EUR million Q1/2015 Q1/2014 % 2014 2013 % Revenue 144.5 137.7 5 564.7 659.4
Operative EBITDA 19.2 14.5 32 68.1 68.3
13.3 10.5
10.4
12.6 8.8 43 43.3 45.8
8.7 6.4
6.9
4.7 8.3
35.2 46.9
Cash flow 8.2
37.9
50 Kemira Investor Presentation (updated on April 24, 2015)
1.3 1.4 1.5 0.6 0.6 0.7 0.5 0,5 0,7 2014 2016 2020
CAGR 1.9% 2.4% 4.4%
APAC EMEA North America
Source: Management estimation based on various sources
* Coagulants and Polymers in EMEA, Coagulants in North America and Polymers in APAC
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12.1% 10.4%
2013 2014
565 659
2013 2014 65% 20% 15%
Other Coagulants Polymers Operative EBITDA margin Revenue, EUR million
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MUNICIPAL & INDUSTRIAL
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Municipalities Private operators Industrial customers
Polymers (EPAM, DPAM, Polyamines, PolyDADMACs, Resin Amines), Al Coagulants, Fe Coagulants, Antiscalants, Defoamers
Raw water treatment, Waste water treatment, Sludge treatment, Membrane care, Biogas yield enhancement, Disinfection of water streams
Improved:
efficiency
flexibility
comprehensive portfolio
company that manufactures and supplies a comprehensive range
December 19, 2017 Kemira credit investor presentation 2015
54 Kemira Investor Presentation (updated on April 24, 2015)
Foreign shareholders share of free float 33% Households share of free float 30% Other share of free float 37%
Index 8% Value 17%
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51% 7% 2% 39% 36% 8%
Institutional investors by investment style, 2015 GARP 30% Other 14% Growth 30%
33% 9% 55% 3% 22%
Kemira Investor Presentation (updated on April 24, 2015)
Hedge Fund 1 %
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UK 9% Germany 8% USA 17% Finland 40% Canada 7% Rest of the world 3% Sweden 5% Norway 5% France 4% Switzerland 2%