in seasonally strong third quarter JANUARY-SEPTEMBER 2019 Key - PowerPoint PPT Presentation

JARI ROSENDAL, PRESIDENT AND CEO PETRI CASTRÉN, CFO OCTOBER 24, 2019 Excellent profitability in seasonally strong third quarter JANUARY-SEPTEMBER 2019

Key points in Q3 2019 • Focus on value over volume visible in financials • Efficiency actions continued • Strong profitability improvement again – operative EBITDA margin 17.1% • Slowdown in oil & gas shale market accelerated during the quarter • Some softness in the near-term market demand in Pulp & Paper OCTOBER 24, 2019 Q3 2019 RESULTS 2

Financial highlights Focus on value over volume EUR million Q3 Q3 Δ% FY Our actions for higher profitability resulted in • (except ratios) 2019 2018 2018 some expected lost volumes Revenue 669.6 +3 2,592.8 689.8 Organic growth +6% in Industry & Water driven • Operative EBITDA 118.1 89.0 +33 323.1 by North American water treatment and Oil & Gas despite slowdown in shale market in Q3 of which margin 17.1% 13.3% - 12.5% Operative EBITDA +33% to margin of 17.1% Operative EBIT 71.1 50.0 +42 173.8 Effective price and cost management • of which margin 10.3% 7.5% - 6.7% Favorable currency development • • IFRS 16 impact EUR +9.1 million in Q3 Net profit 43.3 22.1 +96 95.2 Operative EBIT +42% to over 10% margin for EPS diluted, EUR 0.27 0.14 +94 0.58 the first time since 2009 OCTOBER 24, 2019 Q3 2019 RESULTS 3

Pulp & Paper – profitability improved clearly Market environment REVENUE AND ORGANIC REVENUE GROWTH (Y-ON-Y) EUR million Some softness and increasing amount of • 390 uncertainty about the near-term market demand 385 383 381 376 373 373 372 369 369 363 Organic growth -3% Intentional focus on improving product mix -3% • 0% +1% +2% +5% +5% +6% +7% +4% +0% -3% Exit of ECOX business and lower caustic soda • prices (mainly trading product) impacted organic Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 growth – underlying growth flat 2017 2018 2019 Operative EBITDA margin 16.0% OPERATIVE EBITDA AND OPERATIVE EBITDA-% EUR million • Value over volume visible also in EBITDA and 16.0% 12.4% 13.0% 13.4% 14.9% 11.6% 12.1% 13.6% 13.1% 13.3% 14.4% EBIT leading to improved profitability 61.3 55.4 53.7 Cost savings supporting the margin improvement • 52.3 51.2 50.7 48.5 47.8 46.0 45.4 42.7 *IFRS 16 impact EUR +3.7 million in Q3 and EUR • +10.3 million in 1-9/2019 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1* Q2* Q3* 2017 2018 2019 OCTOBER 24, 2019 Q3 2019 RESULTS 4

Industry & Water – profitability continued at exceptionally high level Market environment REVENUE AND ORGANIC REVENUE GROWTH (Y-ON-Y) EUR million Water treatment market solid • 307 290 284 272 271 267 264 259 248 245 238 • Shale market slowdown accelerated during Q3 • Uncertainty regarding key polymer raw material in Europe due to supply disruptions +6% +9% +15% +20% +11% +14% +11% +2% +4% +6% +5% Organic growth +6% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 • Improved pricing in water treatment 2017 2018 2019 Strong growth in CEOR** polymers and seasonal oil • OPERATIVE EBITDA AND OPERATIVE EBITDA-% sands water treatment business EUR million Operative EBITDA margin 18.5% in Q3 16.8% 18.1% 18.5% 13.9% 56.8 • Water treatment main driver for the improvement 9.6% 10.9% 12.8% 12.9% 12.3% 52.4 11.8% 45.0 9.6% 36.7 36.0 34.8 Coagulant asset in Italy and water treatment facility • 33.3 29.3 26.6 25.3 22.9 operations business in Finland (Operon) divested • *IFRS 16 impact EUR +5.4 million in Q3 and EUR +14.9 million in 1-9/2019 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1* Q2* Q3* **CEOR, chemical enhanced oil recovery 2017 2018 2019 OCTOBER 24, 2019 Q3 2019 RESULTS 5

Capacity additions and cost savings via investments PRODUCTS Ongoing investments with positive EBITDA contribution in 2020 ◼ 20% Other: ◼ 25% Bleaching • China – New AKD sizing* manufacturing plant e.g. defoamers, and pulping dispersants, is in the ramp-up phase and biocides • Netherlands – Expansion of Oil & Gas polymers close to start-up Revenue EUR 2,663 Capacity additions under construction ◼ 15% million Sizing* US – Expansion of Oil & Gas polymers in • (LTM) and commercial operation in 2021 strength South Korea – New dry polymer capacity for • Asian market in 2021 ◼ 20% ◼ 20% Recently decided Coagulants Polymers UK – Multi-million investment to double • coagulant capacity in Goole to anticipate *Sizing = Resistance against water absorption expected local market growth OCTOBER 24, 2019 Q3 2019 RESULTS 6

Key profitability improvement actions in 2016-2019 Organic growth / expansion of site Acquisition Operational efficiencies Closure of site / divestment Start-up of Ortigueira sodium Chevron CEOR deal & Start-up of new AKD wax site (CN) Operative chlorate site (BR) Botlek expansion EBITDA Polymer investment decision (US) Bradford polymer expansion Start-up of Joutseno chlorate 1-9/2019: Joint Venture – Dry polymers (SK) (UK) expansion (FI) 16.0% (IFRS 16 San Giorgio polymer Major oil sands tailings water AKD wax manufacturing JV included) expansion (IT) treatment deal (CA) deal closed (CN) 2019 Operative 2018 EBITDA 2015: Move from ‘Value 2017 12.1% over volume’ to ‘Active ‘Value over volume’ initiated price management’ 2016 Two segment Odyssey go-live in Europe Cost savings in structure operational Pulp & Paper Transportation agreement Closing of ECOX detergent with Odyssey Odyssey go-live production (SWE) Divestment of coagulant asset (IT) in North America Botlek modernization (NL) Divestment of BOOST operational Kemira Operon excellence program launch (water treatment facility Closures of Ottawa (CA) and operations, FI) Zaramillo (ES), coagulants OCTOBER 24, 2019 Q3 2019 RESULTS 7

Key operative focus areas 1. Active price management 2. Continue to improve customer satisfaction scores (NPS) 3. Modify product & service offering to cater better profitable growth 4. Improve operational excellence 5. Ramp-up new AKD sizing manufacturing site in China 6. Finalize CEOR* polymer capacity addition in the Netherlands 7. Construction of emulsion polymer capacity in the US 8. Prudent cost-control in all areas *CEOR, chemical enhanced oil recovery OCTOBER 24, 2019 Q3 2019 RESULTS 8

PETRI CASTRÉN, CFO OCTOBER 24, 2019 Financials Q3 2019 OCTOBER 24, 2019 Q3 2019 RESULTS 9

Successful pricing drives improvement REVENUE AND ORGANIC GROWTH (Y-ON-Y) Operative EBITDA margin 17.1% EUR million 0% +2% 690 Focus on value over volume is bearing fruit +3% • -2% 670 Due to the adoption of IFRS 16 -standard, fixed costs • do not include operating lease expenses in 2019, corresponding to a positive EBITDA impact of EUR +9.1 million in Q3 and EUR +25.1 million in 1-9/2019 Q3 2018 Sales Sales Currency Acquisitions Q3 2019 volumes prices impact & Divestments OPERATIVE EBITDA BRIDGE EUR million +0.8 -3.7 +6.3 118.1 -9.1 +13.0 109.0 +18.8 -6.1 89.0 Q3 Sales volumes Sales prices Variable costs Fixed costs Currency Other Q3 Adoption of "Pre IFRS 16 2018 impact 2019 IFRS 16 comparison" standard OCTOBER 24, 2019 Q3 2019 RESULTS 10

Net impact of sales price & variable costs exceptionally positive SALES PRICE VS VARIABLE COST TREND SALES PRICES AND VARIABLE COSTS (ROLLING 12-MONTH CHANGE Y-O-Y) (CHANGE Y-O-Y) EUR million EUR million 180 47 42 37 120 34 32 28 26 38 36 60 13 24 16 29 11 13 23 23 9 8 19 5 4 11 0 11 -9 3 0 -2 -2 -10 -3 -18 -4 -5 -60 -10 -23 -13 -13 -16 -18 -20 -23 -23 -16 -120 -26 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 -180 2016 2017 2018 2019 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Net impact on EBITDA (sales prices-variable costs) Brent oil, USD Sales prices* Variable costs* Sales prices Variable costs * 12-month rolling change vs previous year in EUR million OCTOBER 24, 2019 Q3 2019 RESULTS 11

Strong cash flow ALL KEY FIGURES IN EUR MILLION CASH FLOW FROM OPERATIONS • Cash flow improvement driven by strong results 271 244 IFRS 16 impact EUR +21 million on cash flow from • 210 205 operations in 1-9/2019 122 • Kemira’s Pension Fund Neliapila returned excess capital of EUR 15 million to Group in Q1 Typically cash flow is H2-weighted, especially due to • changes in net working capital 2016 2017 2018 1-9 2018 1-9 2019 CAPITAL EXPENDITURE EXCL. ACQUISITIONS 213 190 ◼ Growth capex In the first nine months, the largest capital • 150 expenditures were related to polymer expansion in 95 66 the Netherlands and new AKD manufacturing site in 120 44 97 China 62 33 124 118 • CAPEX excl. acquisitions estimated to be around 106 64 58 EUR 180-220 million in 2019 2016 2017 2018 1-9 2018 1-9 2019 OCTOBER 24, 2019 Q3 2019 RESULTS 12