growth continued JANUARY-JUNE 2018 Key financial highlights Q2 - - PowerPoint PPT Presentation

JANUARY-JUNE 2018

Strong organic growth continued

JARI ROSENDAL, PRESIDENT AND CEO PETRI CASTRÉN, CFO JULY 20, 2018

Key financial highlights

• Organic growth +9%

– Healthy organic growth in all businesses – Strong growth continued in Oil & Gas

• Operative EBITDA increased 4%

– Sales prices started to offset increasing raw material costs – Currencies were still significant headwind

• Currencies EUR -9 million on EBITDA level vs

Q2 2017 EUR million (except ratios) Q2 2018 Q2 2017 Δ% FY 2017 Revenue 647.6 617.2 +5 2,486.0 Operative EBITDA 80.2 77.1 +4 311.3

• f which margin

12.4% 12.5%

• 12.5%

Operative EBIT 45.1 43.6 +3 170.3

• f which margin

7.0% 7.1%

• 6.9%

Net profit 23.5 19.6 +20 85.2 EPS, EUR 0.14 0.12 +17 0.52

Q2 2018

VARIABLE COST SPLIT Last 12 months EUR 1.5 billion TOP 10 RAW MATERIALS BY SPEND 1. Sodium hydroxide (caustic soda) 2. Acrylonitrile (OD) 3. Colloidal silica dispersion 4. Amines (OD) 5. Aluminum hydrate 6. Petroleum solvents 7. Acrylic acid (OD) 8. Acrylic ester (OD) 9. Alpha olefin (OD)

• 10. Sodium chloride (salt)

Top 10 account for 45%

• f Kemira’s raw material spend

OD = Oil & gas derivative

EXPOSURE TO OIL RELATED RAW MATERIALS

Kemira’s variable cost split and top raw materials

 30%

Oil & gas derivative

 70%

Not oil related

 65%

Raw materials

 15%

Electricity & energy

 20%

Logistics

Raw material prices on inflationary path

• Especially oil-based raw

material prices have been very volatile

• Price changes in the

value chain from WTI Crude Oil to acrylonitrile and acrylic acid illustrated on the right

• Inflationary pressure so

far only partially passed

• n to customers

WTI +41% Propylene +28% Acrylonitrile +19% Key feedstock Key oil related raw materials

CERTAIN FEEDSTOCK AND RAW MATERIAL PRICES IN THE US Change y-o-y

Acrylic Acid +6%

Change in Q2/18:

• 50%
• 30%
• 10%

10% 30% 50% 70% 90% Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 WTI Crude Oil US Propylene Acrylonitrile Acrylic Acid

Majority of contracts with fixed annual pricing

Pulp & Paper – Contract types and pricing terms on high level

• Length – Around 95% of contracts are 1-year or

longer / only 5% are spot deals

• Pricing – Around 70% fixed / 30% formula or spot

pricing Industry & Water – Contract types and pricing terms

• Length – Around 60% of contracts are 1-yr or longer

/ 40% spot deals

• Pricing – Around 60% fixed / 40% formula or spot

pricing, incl. Oil & Gas where contracts are either formula or spot based

Pulp & Paper – good organic growth, profitability hampered by FX

H1 organic growth +5%

• Higher sales prices contributing to organic

growth

• Good volume growth in chlorate
• FX offsetting reported revenue growth

Operative EBITDA below prior year

• Currencies main headwind, impacted

EBITDA by EUR -9 million in H1

• Sales price increases have started to

compensate higher raw material prices Update on China AKD JV/acquisition

• Kemira agreed in Q3 2017 to form joint

venture with Tiancheng

• Closing still pending certain authority

approvals

REVENUE EUR million OPERATIVE EBITDA AND EBITDA-% EUR million

741 745

H1 2017 H1 2018

94 88

H1 2017 H1 2018 11.8% 12.7%

Industry & Water – profitable growth continued in water treatment and oil & gas

Strong revenue growth

• In H1, organic growth +12%
• Oil & Gas continued its strong momentum
• Volume growth in water treatment continued

driven by positive underlying market trends Operative EBITDA increased

• EBITDA improvement driven mainly by higher

gross margin

• Currency impact EUR -7 million vs H1 2017

Polymer production optimization

• Intermediary-product manufacturing unit closed

as a part of long-term polymer manufacturing

• ptimization

REVENUE EUR million OPERATIVE EBITDA AND EBITDA-% EUR million

486 517

H1 2017 H1 2018

52 61

H1 2017 H1 2018 11.9% 10.8%

Outlook for 2018

Kemira expects its operative EBITDA to increase from the prior year (2017: EUR 311.3 million).

EUR million 2015 2016 2017 H1 2017 H1 2018 2018

• utlook

Operative EBITDA 287 303 311 146 150 Increase

PETRI CASTRÉN, CFO JULY 20, 2018

Financials Q2 2018

Organic growth continued

Q2 2018

Group’s organic growth +9%

• Pulp & Paper +6%, Industry & Water +14%

Operative EBITDA +4%, margin 12.4%

• Profitability negatively impacted by FX and lag in

implementing sales price increases

72.8 78.9 80.8 70.0 69.0 77.1 84.5 80.7 69.4 80.2 12.5% 13.4% 13.6% 11.7% 11.3% 12.5% 13.6% 12.7% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 617 +2%

• 4%

0% 648 Q2 2017 Sales volumes Sales prices Currency impact Acquisitions Q2 2018 +8%

REVENUE AND ORGANIC REVENUE GROWTH (Y-ON-Y) EUR million OPERATIVE EBITDA AND OPERATIVE EBITDA MARGIN EUR million

12.4% 11.3%

Earnings per share up by 17%

• EPS increased mostly due to higher operative EBITDA

and gain on sale

– Q2 2018 includes also EUR 9 million write-down of manufacturing unit and Q2 2017 includes restructuring costs of EUR 10 million

EUR/USD SINCE JANUARY 2017

1.00 1.05 1.10 1.15 1.20 1.25 1.30 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 2017 2018

CURRENCY IMPACT ON EBITDA

EUR million (Rounded figures) Q2 2018 Q2 2017 Delta H1 2018 H1 2017 Delta Translation / transaction

• 4
• 1
• 3
• 10
• 1
• 9

Hedges and balance sheet revaluation

• 4

+1

• 5
• 5

+2

• 7

Currencies in total

• 8
• 9
• 15
• 16

CURRENCIES HAD EUR -16 MILLION IMPACT ON H1 2018 VS H1 2017 OF WHICH -10 FROM EUR/USD

Adverse FX movements impacted EBITDA

Negative FX effect on revenue and EBITDA (Q2/17 vs Q2/18) Negative FX effect on hedges and balance sheet (Mar 31 vs Jun 30)

SALES PRICE VS VARIABLE COST TREND

• 200
• 150
• 100
• 50

50 100 150 200 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Brent oil, USD Sales prices* Variable costs*

SALES PRICES AND VARIABLE COSTS (CHANGE Y-O-Y)

9 5

• 3
• 10
• 16
• 20
• 10
• 2
• 2

11

• 9
• 18
• 26
• 23
• 16
• 4

3 11 23 47

• 18
• 23
• 23
• 13

16 13 13 26 36

• 40
• 30
• 20
• 10

10 20 30 40 50 60 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 Net impact on EBITDA (sales prices-variable costs) Sales prices Variable costs

Net impact of sales price & variable cost delta positive for the 1st time since Q2 2016

* 12-month rolling change vs previous year in EUR million

Pulp & Paper – good growth but profitability impacted by raw material prices and FX

• Organic growth continued driven by pricing but drastic FX headwind impacted operative EBITDA
• Raw material prices increasing – mitigating sales price increases announced
• Maintenance breaks had additional negative impact on EBITDA vs. Q2 2017

362 361 365 369 372 369 363 373 369 376 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 47.9 49.3 51.8 46.3 46.0 47.8 48.5 55.4 42.7 45.4 13.2%13.7% 14.2% 12.6% 12.4% 13.0% 13.4% 14.9% 11.6% 12.1% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018

+3% +1%

• 4%
• 2%

0% +1% +2% +5%

REVENUE AND ORGANIC REVENUE GROWTH (Y-ON-Y) EUR million OPERATIVE EBITDA AND OPERATIVE EBITDA MARGIN EUR million

+5% +6%

Industry & Water – strong growth continued and margin improved

• Strong organic growth, USD was still headwind for reported figures
• Oil & Gas +26% to EUR 56 million in Q2 2018, organic growth again over 30%

– Vast majority of growth in Oil & Gas came from higher sales prices

• Growth also continued in water treatment with positive pricing and volume development

220 227 231 228 238 248 259 264 245 272 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 24.9 29.6 29.0 23.7 22.9 29.3 36.0 25.3 26.6 34.8 11.3% 13.1% 12.5% 10.4% 9.6% 11.8% 13.9% 9.6% 10.9% 12.8% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018

• 7%
• 5%

0% +9% +15%

• 5%

+6% +20% +14%

REVENUE AND ORGANIC REVENUE GROWTH (Y-ON-Y) EUR million OPERATIVE EBITDA AND OPERATIVE EBITDA MARGIN EUR million

+11%

Development of selected key figures

9.8% 9.9% 9.7% 9.2% 9.7% 2015 2016 2017 H1 2017 H1 2018 642 634 694 758 773 2015 2016 2017 H1 2017 H1 2018

ALL KEY FIGURES IN EUR MILLION EXCEPT RATIOS

248 271 205 41 58 2015 2016 2017 H1 2017 H1 2018 104 118 124 44 41 78 95 66 38 22 2015 2016 2017 H1 2017 H1 2018

CASH FLOW FROM OPERATIONS CAPITAL EXPENDITURE EXCL. ACQUISITIONS NET DEBT AND LEVERAGE RATIO OPERATIVE RETURN ON CAPITAL EMPLOYED

2.5 2.1 2.2 2.6 2.2  Growth capex

JANUARY-JUNE 2018

Appendix

SEGMENT SPLIT PRODUCTS

GEOGRAPHIES

Kemira in brief

FY2017: REVENUE EUR 2,486 MILLION, OPERATIVE EBITDA EUR 311 MILLION, OPERATIVE EBITDA MARGIN 12.5%, OPERATIVE ROCE 9.7%

 25% Bleaching and pulping  20% Polymers  20% Other: e.g. defoamers, dispersants, and biocides  20% Coagulants  15% Sizing and strength

39% AMERICAS 1.USA 2.Canada 3.Brazil 52% EMEA 1.Finland 2.Sweden 3.Germany 9% APAC 1.China 2.South Korea 3.Indonesia

 59%

Pulp & Paper

 41%

Industry & Water

CUSTOMERS 2,000 customers TOP 10 customers are ~25% of revenue TOP 50 customers are ~45% of revenue EXAMPLES OF LARGEST CUSTOMERS

Municipalities, e.g. Frankfurt, London, New York, Paris, Shanghai, Singapore #1 in water treatment in NA and Europe #2 in friction reduction in North American shale oil & gas #1 globally

1,068 1,170 1,417 1,457 1,477 130 137 171 195 198 2013 2014 2015 2016 2017

REVENUE AND OPERATIVE EBITDA REVENUE BY PRODUCT CATEGORY

REVENUE BY CUSTOMER TYPE AND MARKET GROWTH

Pulp & Paper – market leader with solid track record

MARKET ENVIRONMENT REVENUE BY GEOGRAPHIES AND MARKET GROWTH BY REGION CUSTOMER EXAMPLES

 50% EMEA  35% Americas  15% APAC  35% Bleaching & pulping  25% Sizing & strength  20%

Defoamers, dispersants, biocides and

• ther process

chemicals

 10% Polymers  10% Other  40% Pulp  20% Printing & writing papers  40% Board & tissue

• 1-2%

2-3% 1-2% Market growth 2-3% 0-1% 0-1% Market growth

AkzoNobel (pulp) #4 BASF (paper) #2 Solenis (paper) #3 Kemira (pulp and paper) m.s. ~16% #1 Ecolab (paper) #5

Note: Revenue by industry, product and geography rounded to the nearest 5%

REVENUE BY PRODUCT CATEGORY

REVENUE BY APPLICATION TYPE AND MARKET GROWTH

Industry & Water – strong positions in chosen categories

REVENUE BY GEOGRAPHIES AND MARKET GROWTH BY REGION

 40% Coagulants  40% Polymers  20% Other products such as defoamers and biocides

2-3% 5-6% 2-3%

 50% EMEA  45% Americas  5% APAC  70% Water treatment  10% Other  20% Oil & Gas

5-6% 3-4% 3-4%

WATER TREATMENT

Amsterdam Barcelona Frankfurt London Oslo Paris Stockholm Los Angeles Montreal New York City Toronto Melbourne Shanghai Singapore

OIL & GAS

Note: Revenue by industry, product and geography rounded to the nearest 5%

Market growth Market growth

CUSTOMER EXAMPLES

938 921 906 906 924 945 973 1,009 1,016 1040

111 107 105 107 105 105 112 113 117 123 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018

REVENUE AND OPERATIVE EBITDA ROLLING 12 MONTHS MARKET ENVIRONMENT

Market share ~30% in coagulants and ~20% in polymers Main competitors in coagulants:

• Feralco (Europe)
• Kronos (Europe)
• Chemtrade (US)
• USAlco (US)

Market share ~25% in polymers used in shale oil & gas Main peers in polymers (also in water treatment):

• SNF
• BASF
• Solenis
• Solvay (only O&G)

MUNICIPAL (40%), customer examples INDUSTRIAL (60%), customer examples

Municipal Industrial

Global trends favor Kemira

RECYCLING E-COMMERCE ALTERNATIVE MATERIALS TO PLASTICS REGULATION DRIVING BETTER WATER QUALITY OIL RESOURES ARE BECOMING HARDER TO EXTRACT

Increasing the lifespan and quality of the recycled fibers Growing demand for light- weight and recyclable materials in packaging Increasing need for biobased and biodegradable materials in packaging materials Stricter regulation increases usage of chemicals and requires more efficient water treatment Oil yield boosting and lifespan extension of resources is a growing

• pportunity for water

soluble polymer chemistry

REVENUE EUR million

2,229 2,137 2,373 2,363 2,486 2013 2014 2015 2016 2017

OPERATIVE EBITDA OPERATIVE EBITDA MARGIN EUR million

252 253 287 303 311 11.3% 11.8% 12.1% 12.8% 12.5% 2013 2014 2015 2016 2017

Delivering profitable growth

Kemira offers stable and competitive dividend

• Cash flow from operations has been partly

invested into future growth and partly distributed to shareholders as dividends

• Kemira has paid dividend every year since

listing of shares in 1994

• Kemira offers attractive dividend yield

0.53 0.53 0.53 0.53 0.53 0.53 0.53 0.13 0.37 0.47 0.44 0.51 0.61 0.43

5.8% 4.5% 4.4% 5.4% 4.9% 4.4% 4.6%

2011 2012 2013 2014 2015 2016 2017

 Dividend per share  Dividend yield

Kemira’s dividend yield calculated using the share price at year-end  Growth investments per share

Key figures

EUR million Q2 2018 Q2 2017 Δ% H1 2018 H1 2017 Δ% 2017 2016 Δ% Revenue 647.6 617.2 +5 1,261.4 1,227.3 +3 2,486.0 2,363.3 +5 Operative EBITDA 80.2 77.1 +4 149.6 146.1 +2 311.3 302.5 +3 margin 12.4% 12.5%

• 11.9%

11.9%

• 12.5%

12.8%

• Operative EBIT

45.1 43.6 +3 79.0 78.6 +1 170.3 170.1 margin 7.0% 7.1%

• 6.3%

6.4%

• 6.9%

7.2%

• Net profit

23.5 19.6 +20 46.6 39.4 +18 85.2 97.9

• 13

Earnings per share, EUR 0.14 0.12 +17 0.28 0.24 +17 0.52 0.60

• 13

Cash flow from operations 23.4 28.6

• 18

57.9 40.8 +42 205.1 270.6

• 24

Capex excl. acquisitions 39.8 45.2

• 12

63.0 82.1

• 23

190.1 212.6

• 11

Net debt 773 758 +2 773 758 +2 694 634 +10 NWC ratio 9.6% 9.5%

• 9.6%

9.5%

• 9.4%

10.2%

• Operative ROCE (rolling

12 months) 9.7% 9.2%

• 9.7%

9.2%

• 9.7%

9.9%

• Personnel at period-end

4,858 4,849 4,858 4,849 4,732 4,818

• 2

Currencies

Currency exchange rates had EUR -26 million impact on revenue and EUR -9 million impact on the operative EBITDA in Q2 2018 compared to Q2 2017 Guidance: 10% change in our main foreign currencies would approximately have EUR 15 million impact on operative EBITDA on an annualized basis

 43 % EUR  10 % Others KEMIRA REVENUE DISTRIBUTION Q2 2018 KEMIRA COST DISTRIBUTION Q2 2018  2 % SEK  3 % CNY  4 % CAD  36 % USD  10 % Others  5 % CNY  5 % CAD  7 % SEK  29 % USD  44 % EUR  2 % BRL

EUR million Q2 2018 Q2 2017 Δ% H1 2018 H1 2017 111111 Δ% 2017 2016 Δ% Revenue 376.0 368.9 +2 744.6 741.1 1,476.9 1,457.3 +1 Operative EBITDA 45.4 47.8

• 5

88.2 93.8

• 6

197.7 195.3 +1 margin 12.1 13.0%

• 11.8%

12.7%

• 13.4%

13.4%

• Operative EBIT

22.0 25.7

• 14

40.9 49.6

• 17

104.8 111.6

• 6

margin 5.9% 7.0%

• 5.5%

6.7%

• 7.1%

7.7%

• Operative ROCE*, %

8.3% 9.1%

• 8.3%

9.1%

• 9.0%

10.0%

• Capital expenditure

19.1 35.2

• 46

32.5 65.0

• 50

138.3 125.1 +11 Cash flow after investing activities 2.3 8.9

• 74

22.9

• 14.0
• 15.7

105.7

• 85

KEY FINANCIALS

Pulp & Paper

*12-month rolling average

EUR million Q2 2018 Q2 2017 Δ% H1 2018 H1 2017 Δ% 2017 2016 Δ% Revenue 271.7 248.3 +9 516.7 486.1 +6 1,009.1 906.0 +11 Operative EBITDA 34.8 29.3 +18 61.4 52.3 +17 113.6 107.2 +6 margin 12.8% 11.8%

• 11.9%

10.8%

• 11.3%

11.8%

• Operative EBIT

23.0 17.9 +28 38.1 29.0 +31 65.5 58.5 +12 margin 8.5% 7.2%

• 7.4%

6.0%

• 6.5%

6.5%

• Operative ROCE*, %

12.6% 9.4%

• 12.6%

9.4%

• 11.0%

9.7%

• Capital expenditure

18.4 10.0 +84 27.3 17.1 +60 51.7 85.5

• 39

Cash flow after investing activities 6.1 3.3 +85 2.0 12.5

• 46.9

35.6 +32 KEY FINANCIALS

Industry & Water

*12-month rolling average

EUR million Q2 2018 Q2 2017 H1 2018 H1 2017 2017 2016 Net profit for the period 24 20 47 39 85 98 Total adjustments 53 60 95 106 204 187 Change in net working capital

• 32
• 23
• 63
• 65
• 34

29 Finance expenses

• 11
• 18
• 12
• 22
• 25
• 20

Income taxes paid

• 10
• 11
• 9
• 18
• 25
• 23

Net cash gen. from operating activities 23 29 58 41 205 271 Purchases of subsidiaries and acquisit. 2 3 2 Capital expenditure

• 40
• 45
• 63
• 82
• 190
• 213

Proceeds from sale of assets 1 5 3 37 Change in long-term loan receivables

• 5

1 Cash flow after investing activities

• 13
• 16

4

• 41

13 98

Cash flow

FY 2017

Revenue split by country

USA 27% Canada 6% Brazil 3% Uruguay 2% Other Americas 1% Finland 14% Sweden 6% Germany 5% Poland 3% UK 3% Spain 2% Other APAC 4% Korea 1% China 4% Russia 2% Netherlands 2% France 2% Italy 2% Other EMEA 9% Norway 2%

Important information about financial figures

Kemira provides certain financial performance measures (alternative performance measures)

• n non-GAAP basis. Kemira believes that alternative performance measures, such as organic

growth*, EBITDA, operative EBITDA, cash flow after investing activities, and gearing followed by capital markets and Kemira management, provide useful information of its comparable business performance and financial position. Selected alternative performance measures are also used as performance criteria in remuneration. 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

• f individual figures may deviate slightly from the sum figure presented.

* Revenue growth in local currencies, excluding acquisitions and divestments