Kemira Credit investor presentation Disclaimer This presentation - - PowerPoint PPT Presentation

Credit investor presentation

Kemira

Petri Castrén | May, 2014

Disclaimer

2

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

• r implied by any forward-looking statements. In some cases, such forward-looking statements can be identified by

terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “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

• n circumstances that may or may not occur in the future. Future results may vary from the results expressed in, or

implied by, the forward-looking statements contained in this presentation, 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.

Our business Our strategic focus Review of financials

Agenda 1 2 3

Key debt metrics

4

Potential bond transaction

5

Appendix

6

4

• 1. Our business

Kemira – global EUR 2.2 billion chemicals company

R&D and technology centers Employees O&M management Houston, USA

SOUTH AMERICA 7%

250 M&I management Frankfurt, Germany KEMIRA HEADQUARTERS Helsinki, Finland

EUROPE, MIDDLE EAST AND AFRICA 57%

2,600 1,300

ASIA PACIFIC 6%

340 Paper management Hong Kong Regional HQ Atlanta, USA Regional HQ Shanghai, China

NORTH AMERICA 30%

5

4,500 employees 59 manufacturing sites Presence in ~40 countries Sales in > 100 countries

6

Focus on paper, oil & gas, mining and water treatment

Improving our customers’ water, energy and raw material efficiency

Kemira in the value chain of WQQM*

*) Water Quality and Quantity Management

Expertise and tailored combinations of chemicals for water- intensive industries

Key figures

EUR million (except ratios) 2013 2012 2011 2010 Revenue 2,229 2,241 2,207 2,161 Operating profit, excluding non-recurring items 164 156 157 162 % of revenue 7.4 6.9 7.1 7.5 Gearing, % at period-end 41 42 38 39 Personnel at period-end 4,453 4,857 5,006 4,977

7

Our business is organized into customer-based segments

14% 30% 8% 48%

SALES BY SEGMENT (2013)

PAPER OIL & MINING MUNICIPAL & INDUSTRIAL CHEMSOLUTIONS*

*) Kemira closed the divestment of formic acid business on March 6, 2014. The remaining business of ChemSolutions will be transferred to Paper and ChemSolutions will be discontinued. 8

11% 28% 8% 53%

OPERATIVE EBIT BY SEGMENT (2013)

We support pulp and paper producers in innovation and process efficiency

35% 20% 45%

• 1. PAPER,

Revenue 2013: EUR 1,068 million Operative EBIT 2013: EUR 86.5 million, 8.1% margin

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.

9

Market position: #1 in EMEA #2 in North America, South America and APAC Packaging, board and tissue grades Paper grades Chemical, mechanical and recycled pulp

Our innovative chemicals improve yield in oil, gas and metals recovery

• 2. OIL & MINING,

Revenue 2013: EUR 312 million Operative EBIT 2013: EUR 17.4 million, 5.6% margin

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. Market position: #2 in unconventional Oil & Gas in North America. 20% 80% Business management Oil & Gas Business management Minerals & Metals

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With our chemistry we enable the whole range of water treatment

• 3. MUNICIPAL & INDUSTRIAL,

Revenue 2013: EUR 659 million Operative EBIT 2013: EUR 45.8 million, 6.9% margin

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. Market position: In water treatment chemicals #1 in EMEA #2 in North America 10% 65% 25% Other Coagulants Polymers

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• 2. Our strategic focus

INNOVATION We invest in innovation and expertise. BUSINESS FOCUS We provide expertise and chemicals for water-intensive industries. GROWTH We target profitability and above-the- market growth. GEOGRAPHICAL FOCUS We strengthen position in mature markets and expand selectively in emerging markets.

Expanding to leadership in target markets

2014–2015 Focus Achieve a sustainable position in key markets. 2015–2017 Accelerate Grow in emerging markets through new products & services. 2017–2020 Expand Become leader in target markets. 2012–2013 Redesign Reach target profitability by implementing “Fit for Growth”.

13

Q2 2012 Result

Transformation into a water pure-play is now accomplished

14

AGM 2014

Fit for Growth Performance management system Sharpened strategy 3F and Soto acquisition

Danish distribution business JV Sachtleben Formic acid business Coagulants business in Brazil Food and pharmaceuticals business

Divestments New

• rganization

structure Acquisition of BASF’s AKD emulsion business

Differentiated products’ revenue share increasing to 50%, after the announced portfolio changes

*) Pro forma revenue split, including the revenue impact of all the already announced M&A activities. 15

50% 40% 60% 50%

2012 2013*

In differentiated products we are looking for innovation-driven growth above the market. Higher value to customer means higher margins. In commodity products we are aiming to maximize profitability and cash flow.

22% 12% 11% 19% 24% 8% 4%

Double-digit revenue growth in polymers, sizing and strength in Q1 2014

Sizing and strength +13% Other process chemicals +3% Coagulants

• 17%

Bleaching and pulping +1% Other commodities 0% Organic acids*

• 60%

EUR 530 million Polymers +14%

*) Propionic acid and acetates divested on March 1, 2013 and formic acid on March 6, 2014 16

Differentiated products Commodity products

Leverage mature markets and expand in selected emerging markets

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)

• Innovation driven growth in mature markets
• Emerging market revenue expected to grow from 14% to 16% in 2016

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• 30% gearing in Q1 2014 provides capacity for inorganic

growth

• Strict M&A criteria for focused growth

– Must strengthen our market position and/or our technologies/competencies – EBIT accretive in second full year after closing

• 3F acquisition demonstrates Kemira’s M&A strategy

– Accessing technologies lacking in the portfolio (e.g. monomers) – Accelerating geographical expansion in order to shorten the strategic path (e.g. dry polyacrylamides in the US)

M&A strategy focusing to strengthen market position in the core segments

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35% 65% 50% 50%

Capital allocation focuses on high growth product lines

Capex split average 2010-2012 Capex split in 2013

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Differentiated products Commodity products

Innovation revenue target EUR 250 million in 2016

Targeting to double innovation revenue from 5% in 2012 to ~10% of total sales in 2016

CONTRIBUTING TO 2013’S INNOVATION REVENUE

Paper

• Expanding Fennobind binder production capacity sets the stage for

second-generation Fennobind product launch.

• FennoBond benefits boardmakers, graphical papermakers, and also tissue

and towel manufacturers.

Oil & Mining

• Focus on shale gas including friction reducers and microbial control

enhancements.

• New tagged scale inhibitor products enable measurement of scale inhibitor

levels at oil and gas wells.

• Tailoring binders that minimize bentonite need and more innovation

projects at commercialization phase.

NEW INNOVATION AREAS:

• Next Fennobind generation
• Tagged antiscalants
• Guar replacement
• New friction reduction technology
• Rheology modifiers

Revenue from new products or from products into new applications launched within the past 5 years 2012 2013

EUR 106 million EUR 160 million

20

Streamlined strategic structure with clear focus on water quality and quantity management

Global business with SA focusing on pulp chemicals Oil & Gas focus on Americas and EMEA Mining focus on EMEA and SA Regional business with focus on EMEA and NA Re-entry into emerging markets

• nce legislation comes into force

Growth Cash optimization

Paper Oil & Mining Municipal & Industrial

21

• 3. Review of financials

Key figures and ratios

EUR million (except ratios) 2013 2012 2011 2010 Revenue 2,229 2,241 2,207 2,161 Operating profit, excluding non-recurring items 164 156 157 162

• f which margin

7.4 6.9 7.1 7.5 Share of profit or loss of associates

• 1

11 31 9 Financing income and expenses 39 16 21 27 Capital expenditure, including M&A 198 134 201 107 Cash flow after capital expenditure 196 72 115 169 Cash flow return on capital invested (CFROI), % 10 8 8 6 Equity ratio, % 51 51 51 54 Gearing, % at period-end 41 42 38 39

23

Expansion, maintenance and improvement CAPEX trend

20 40 60 80 100 120 140 160 2010 2011 2012 2013

EUR million

Expansion Maintenance and improvement

134 135 98 76

24

EUR million, expect ratios Mar 31, 2014* Mar 31, 2013* Revenue 2,198.1 2,248.9 Goodwill 507.8 577.8 Other intangible assets 58.6 58.6 Property, plant and equipment 522.7 566.7 Net Working Capital ratio 10.6% 12.1% Operative EBIT 158.3 159.1

Portfolio restructuring and increased profitability improved return on capital employed

25

9.9% 10.4% 11.1% 11.9% 12.0%

Q1 Q2 Q3 Q4 Q1 2013 2014

Kemira operative ROCE*

*Rolling 12 months

Stable cash flow generation

26

133 178 176 200 169 115 72 196 2010 2011 2012 2013

Net cash generated from operating activities Cash flow after investments

2014

Revenue

2016

Operative EBIT 0%-5% organic growth* Revenue Operative EBITDA margin Gearing EUR 2.6 – 2.7 billion 15% below 60% increase 5%-15%

Outlook for 2014 and financial targets for 2016

2013

EUR 164.2 million EUR 2,229 million 11.3% 41% EUR 2,229 million

*) Revenue growth in local currencies, excluding the impact of acquisitions and divestments

27

• 4. Key debt metrics

Profitability and balance sheet have been the main focus in the strategy implementation

29

536 326 2.0 2.0 2.1 1.8 1.3

2010 2011 2012 2013 Q1 2014

Net debt Net debt/

• perative

EBITDA* *operative EBITDA based on rolling 12 month figure

Kemira’s aim is to remain below gearing of 60%

30

39% 38% 42% 41% 30%

20% 30% 40% 50% 60%

2010 2011 2012 2013 Q1 2014

Strong financial position supporting future growth

• pportunities

2.0% 2.0% 1.6% 1.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 2010 2011 2012 2013

• 500
• 400
• 300
• 200
• 100

2014 2015 2016 2017 2018 2019 2020 Gross debt Undrawn EUR 400 million 5+1+1 year Revolving Credit Facility

Debt maturity profile, EUR million Kemira average interest rate (at the end of the period)

31

270 106 60 29 19

Debt portfolio EUR 484 million at the end of Q1 2014

EIB and NIB EUR 270 million Commercial papers EUR 106 million Bank loans EUR 60 million Pension loans EUR 29 million Other EUR 19 milion EUR 484 million

• Undrawn committed credit facilities at the end of Q1 2014 totaled to EUR 445 million (RCF EUR 400 million and EIB loan EUR 45 million)

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33

• 5. Potential bond

transaction

Potential bond transaction

34

Indicative terms and conditions Issuer: Kemira Oyj Status: Senior, unsecured Amount: EUR 200 million expected Maturity: 5 years Coupon: Fixed, annual Documentation: Stand-alone, under Finnish law Covenants: Change of control, Cross default, Negative pledge (bonds) Clearing: Euroclear Finland (RM) Listing: Nasdaq OMX Helsinki Denominations: EUR 100,000 + 1,000 Bookrunners: Nordea Markets and Pohjola Markets

• Kemira is conducting an investor roadshow in

connection with its potential bond issue

• The transaction size is expected at EUR 200 million

and the maturity under discussion is 5 years

• Investor meeting in the Nordic countries will be held
• n May 9th – 14th

• 6. Appendix

35

Kemira manufacturing footprint

Manufacturing footprint globally (59 sites):

20 multipurpose, 30 coagulants, 9 commodity chemicals

Coagulants Commodity chemicals Multipurpose

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South America APAC EMEA

Yanzhou

North America

58% 16% 26%

Operating expenses were EUR 2.1 billion in 2013

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Materials and services and change in inventories Personnel expenses Other expenses Kemira’s main raw materials are: electricity (bleaching), acrylonitrile, acrylic acid, cationic monomer (polymers), hydrochloric acid, sulfuric acid and aluminium hydrate (coagulants)

Sales prices and variable costs trend

• 150
• 100
• 50

50 100 150 200 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2007 2008 2009 2010 2011 2012 2013 Brent oil, USD Sales price* Variable costs*

*) 12-month rolling change vs previous year, meur, excl. Tikkurila and Pigments 38

Q4 Q1 2014

Paper segment

January-March 2014

EUR million Q1/2014 Q1/2013 % 2013 2012 % Revenue 269 259 4 1,068 1,006 6 Operative EBITDA 33.3 30.6 9 130.3 117.5 11

• f which margin

12.4 11.8

• 12.2

11.7

• Operative EBIT

22.3 19.7 13 86.5 75.3 15

• f which margin

8.3 7.6

• 8.1

7.5

• Capital expenditure

12.3 18.2

• 32

75.2 72.2 4 Cash flow 2.6 29.2

• 55.9

8.1

• 39

Paper segment - Technology and market leader in paper wet-end chemistry

Value chain part covered by Kemira RAW MATERIALS INTERMEDIATES PRODUCTS APPLICATIONS CUSTOMER IDUSTRIES CUSTOMERS Electricity Sodium chloride (salt) Crude tall oil Cationic monomer Acrylonitrile Acrylic acid Olefins Fatty acids Maleic anhydride Sulfur Tall oil rosin AKD Wax Isomerized olefins Acrylamide Sodium chlorate Hydrogen peroxide Polymers Defoamers Coagulants Biocides Sizing Strength Additives Surface additives Colorants Sulfuric acid Pulping Bleaching Retention Wet-end process control WQQM Sizing Strength Surface treatment Coloring Pulp Packaging and board Printing and writing Tissue All the major global paper and pulp producers

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1.6 1.7 1.9 2.0 2.1 2.2 0.9 1.0 1.1 1.8 2.0 2.3 1.5 1.6 1.8 2013 2016 2020 2013 2016 2020 Defoamers, biocides and other wet-end process chemicals

Paper segment - Demand for sizing and strength chemicals is growing fastest globally

Pulp and paper industry trends increasing chemical demand:

• Increased use of recycled fibres
• Hardwood replacing softwood in virgin

pulp

• Lightweighting of packaging and board

grades

• Higher filler loads in graphic papers
• New digital printing methods
• Lower water / energy consumption

Market size, EUR billion (CAGR: 2.4%)

GAGR Sizing and strength Miscellaneous commodity chemicals Bleaching chemicals Polymers 3.5% 2.0% 3.0% 1.3% 2.0%

41

Oil & Mining segment

January-March 2014

EUR million Q1/2014 Q1/2013 % 2013 2012 % Revenue 92 76 21 312 321

• 3

Operative EBITDA 10.7 8.7 23 32.7 40.6

• 19
• f which margin

11.6 11.4

• 10.5

12.6

• Operative EBIT

6.3 5.1 24 17.4 25.9

• 33
• f which margin

6.8 6.7

• 5.6

8.1

• Capital expenditure

4.4 2.8 57 69.8 20.2 246 Cash flow 11.9

• 2.0
• 60.6
• 5.3
• 42

Oil & Mining segment - Winning market share with competitive combination of innovation chemicals and application knowledge

Value chain part covered by Kemira RAW MATERIALS INTERMEDIATES PRODUCTS APPLICATIONS CUSTOMERS Acrylonitrile Acrylic acid Various monomers Miscellaneous specialty chemicals and commodities Acrylamide Polymers Dispersants & Antiscalants Biocides Emulsifiers Defoamers Coagulants Formulations Friction Reduction Formation & Well Scale Control Asset integrity Microbial Induced Corrosion Enhanced Oil Recovery Drilling muds Concentrate thickening Mineral slurry preservation Mining processes Scale Control Pumpers Oil & Gas

• perators

Service companies Mine operators

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Oil & Mining segment - Strong market growth across all product lines

• High oil price spurs demand for

identifying new sources

• Global growth of shale gas and wet

shale

• Declining ore assays require improved

processing

• Increasing environmental pressure

which increases demand for waste water treatment

Market size, EUR billion (CAGR: 4.7%)

3.1 3.6 4.3 4.3 5.1 6.1 2.0 2.4 2.9 2013 2016 2020 Polymers Defoamers, biocides and other process chemicals Miscellaneous commodity products

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Municipal & Industrial segment

January-March 2014

EUR million Q1/2014 Q1/2013 % 2013 2012 % Revenue 138 165

• 16

659 687

• 4

Operative EBITDA 14.5 13.9 4 68.3 64.0 7

• f which margin

10.5 8.4

• 10.4

9.3

• Operative EBIT

8.8 8.6 2 45.8 39.2 17

• f which margin

6.4 5.2

• 6.9

5.7

• Capital expenditure

8.3 7.6 9 46.9 31.7 48 Cash flow

• 3.2

0.0

• 36.7

39.2

• 6

45

Municipal & Industrial - Commodity product lines expected to grow, but slightly slower than the market

Demand drivers for raw and waste water as well as sludge treatment chemicals:

• Legislation and regulatory enforcements determine required treated water and

sludge quality standards

• Water reuse is most cost efficient solution to meet the increasing water demand

2.6 3.0 3.4 1.6 1.8 1.9 3.4 3.8 4.4 2013 2016 2020 GAGR Coagulants Antiscalants, biocides, defoamers, miscellaneous commodity chemicals 3.2% 2.8% 3.3% Polymers

Realized restructuring charges, EUR billion

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Municipal & Industrial - Technology and market leader in raw and waste water as well as sludge treatment

• Kemira is the only major supplier producing major water treatment chemicals, polymers and coagulants – thereby

enabling comprehensive application support

• Cost competitiveness through backward integration into virgin raw materials
• 60-70% of sourced raw materials are recycled utilizing waste streams from industrial producers, providing an

additional cost advantage

RAW MATERIALS INTERMEDIATES PRODUCTS APPLICATIONS SALES CHANNEL CUSTOMERS Acrylonitrile Sulfuric acid Hydrochloric acid Aluminium hydrate Iron ore Pickling liquor Copperas Acrylamide Polymers (EPAM, DPAM) Al Coagulants Fe Coagulants Antiscalants Biocides Defoamers Raw water treatment Wastewater treatment Sludge treatment Advanced water treatment Direct sales Distributor/reseller Service companies Municipalities Private

• perators

Industrial customers Value chain part covered by Kemira

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ChemSolutions segment

January-March 2014

EUR million Q1/2014 Q1/2013 % 2013 2012 % Revenue 32 61

• 48

191 228

• 16

Operative EBITDA

• 0.9

10.4

• 20.7

27.3

• 24
• f which margin
• 2.8

17.1

• 10.9

12.0

• Operative EBIT
• 1.1

8.8

• 14.5

15.1

• 4
• f which margin
• 3.5

14.5

• 7.6

6.6

• Capital expenditure

0.6 0.4 50 5.5 10.0

• 45

Cash flow 125.1 81.1 54 82.3 23.6 249

48