Kemira Oyj´s Interim Report January-March 2013: Improved profitability supported by organic growth

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Source: Kemira Water Solutions, Inc.

Kemira Oyj
Stock exchange release
April 23, 2013 at 2.30 pm (CET+1)

  • Organic revenue growth of 3%.
  • Operative EBIT increased 9% to EUR 42.2 million (38.6) with a margin of 7.5% (7.0%).
  • Earnings per share, excluding non-recurring items, decreased to EUR 0.17 (0.19) due to EUR 12 million lower income from the associated companies.
  • The reported earnings per share were reduced to EUR 0.01 (0.19) mainly due to the write-down of EUR 23 million related to the sale of Kemira's shares in the Joint Venture Sachtleben.
  • With the net debt of EUR 357 million (532), the gearing fell to 30% (42% at the end of December, 2012) due to the proceeds of EUR 178 million received from the divestments of Kemira's food and pharmaceuticals businesses and the shares in JV Sachtleben.
  • Outlook for 2013 is unchanged, Kemira expects revenue in local currencies, excluding divestments to be slightly higher than in 2012 and operative EBIT to be significantly higher than in 2012.

Kemira's President and CEO Wolfgang Büchele:

The year 2013 started with organic revenue growth of 3% and an operative EBIT improvement of 9%. The growth was driven by the increased sales volumes in Paper, Municipal & Industrial and ChemSolutions. Polymer sales volumes to Oil & Gas in North America recovered, but sales volumes to Mining continued to decline and resulted in lower revenue for Oil & Mining.

'Fit for Growth' cost savings for the first quarter, 2013 were EUR 9 million and, together with increased sales volumes were the main reason for the profitability improvement. 11 of Kemira's manufacturing sites and 2 production plants are either closed or have been decided to be closed.  This and other efficiency measures have resulted in a reduction of 519 employees (including 91 employees in the divested food and pharmaceutical businesses). The ultimate goal of the 'Fit for Growth' program is to reach at least 10% EBIT margin in 2014.

Today, Kemira has presented its sharpened strategy 'From redesign to expansion' in conjunction with the new financial targets for 2016. Kemira targets profitable, above-the-market growth driven by fast growing differentiated product lines in Paper and Oil & Mining. The Municipal & Industrial segment's focus will be on improving profitability and together with ChemSolutions, on maximizing cash flow generation.

Financial targets for 2016 are EUR 2.6 - 2.7 billion in revenue with an EBITDA margin of 15% and a gearing less than 60%.

Continuous efficiency improvement is the key enabler for the successful strategy implementation. Therefore, in addition to the implementation of 'Fit for Growth', we have announced today our plan to consolidate our six support function service hubs in Europe into a multifunction Business Service Center in Gdansk, Poland. The planned center enables Kemira to serve all of its customers in EMEA in a unified way. We also plan to close our production facility in Vaasa, Finland, belonging to the Paper segment. The purpose for the planned closure is to optimize the utilization of our global process chemicals production network. The profitability turnaround in Municipal & Industrial requires us to implement additional efficiency measures in order to further reduce fixed cost and streamline the manufacturing network.

Key figures and ratios (figures for 2012 are restated)

EUR millionJan-Mar 2013Jan-Mar 2012Jan-Dec
2012
Revenue 560.9 552.9 2,240.9 Operative EBITDA 63.5 62.8 249.4 Operative EBITDA, % 11.3 11.4 11.1 EBITDA 61.1 62.1 179.9 EBITDA, % 10.9 11.2 8.0 Operative EBIT 42.2 38.6 155.5 Operative EBIT, % 7.5 7.0 6.9 EBIT 39.2 36.4 33.1 EBIT, % 7.0 6.6 1.5 Share of profit or loss of associates -1.2 10.8 11.2 Financing income and expenses -24.7 -10.3 -15.7     thereof non-recurring items-24.2-- Profit before tax 13.3 36.9 28.6 Net profit 2.8 30.2 22.4 EPS, EUR 0.01 0.19 0.12 Operative EPS, EUR 0.17 0.19 0.77 Capital employed* 1,595.6 1,717.0 1,673.0 ROCE, %* 2.2 10.5 2.6 Cash flow after investing activities 189.9 -8.1 71.8 Capital expenditure 29.0 19.4 134.1 Equity ratio, % at period-end 50 51 51 Gearing, % at period-end 30 45 42 Personnel at period-end 4,662 5,0514,857

* 12-month rolling average (ROCE, % based on the reported EBIT).

Definitions of key figures are available at www.kemira.com > Investors > Financial information. Comparative 2012 figures are provided in parentheses for some financial results, where appropriate. Operating profit, excluding non-recurring items, is referred to as Operative EBIT. Operating profit is referred to as EBIT.

Events after the review period


Changes to company management

Jukka Hakkila, Group General Counsel has been appointed new deputy CEO as of May 6, 2013.

Frank Wegener has been appointed as the President of Municipal & Industrial segment (previously President, ChemSolutions) and Hannu Virolainen has been appointed as the President, ChemSolutions segment (previously the President of Municipal & Industrial) as of May 1, 2013.

Along with its sharpened strategy presented on April 23, 2013, Paper management has been decided to relocate to Hong Kong, China as of September 1, 2013.

On April, 23, 2013, Kemira announced a plan to establish a multifunction Business Service Center in Gdansk, Poland to serve all of Kemira's businesses in EMEA. In addition to cost efficiency, the planned center enables unified service level to all our customers. The scope of the new center is planned to include all transactional activities in the support functions. Once fully implemented, the annual cost savings for the support functions re-organizing in EMEA are expected to be close to EUR 10 million and the related non-recurring restructuring charges are expected to amount approximately EUR 20 million.

Kemira also announced that it is planning to close its production facility in Vaasa, Finland, belonging to the Paper segment. The purpose for the planned closure is to optimize the utilization of our global process chemicals production network. The annual cost savings for the planned site closure are expected to reach EUR 5 million and the related non-recurring restructuring charges are expected to be approximately EUR 15 million. Continuous efficiency improvement is the key enabler for the successful strategy implementation.

Kemira's new financial targets for 2016, restructuring program 'Fit for Growth' and outlook for 2013 (unchanged)


Kemira will continue to focus on improving its profitability and reinforcing the positive cash flow. The company will also continue to invest in order to secure the future growth in the water quality and quantity management business.

Kemira's financial targets have been revised in connection to its strategy update on April, 23, 2013. The company's new financial targets for 2016 are:

  • revenue EUR 2.6 - 2.7 billion (previously: revenue growth in mature markets > 3% per year, and in emerging markets > 7% per year)
  • EBITDA-% of revenue 15%
  • gearing level < 60%.

The basis for growth is the expanding market for chemicals related to the water quality and quantity management and Kemira's strong expertise in this field. Customers' needs to increase operational efficiency create opportunities for Kemira to develop new products and services for both, current and new customers. Research and Development is a critical organic growth enabler for Kemira and provides differentiation capabilities in the water quality and quantity management markets. Kemira will invest in innovation, technical expertise (knowledge) and competencies (behavior) in targeted focus areas.

Restructuring program 'Fit for Growth'

Kemira Oyj has started to implement its global restructuring program 'Fit for Growth', launched at the end of July, 2012, in order to improve the company's profitability, its internal efficiency and to accelerate the growth in emerging markets without sacrificing business opportunities in the mature markets. The cost savings target with the planned program is EUR 60 million on an annualized basis. In 2012, the cost savings impact of 'Fit for Growth' was EUR 10 million.

The anticipated EUR 60 million cost saving impact of the program is expected to be as follows: EUR 10 million in 2012, EUR 50 million in 2013 and EUR 60 million in 2014. The ultimate goal of the program is to reach at least 10% EBIT margin in 2014. Redundancies will account for 50% of the expected savings. The remaining 50% will be achieved through the manufacturing network consolidation as well as through the leaner operations. Based on the detailed plan of measures, the cost savings estimates for the different segments, based on the detailed plan of measures, are as follows: Paper EUR 22 million, Municipal & Industrial EUR 22 million, Oil & Mining EUR 12 million and ChemSolutions EUR 4 million.

Non-recurring charges related to the restructuring program are estimated to be around EUR 85 million, of which EUR 45 million will be severance payments and external services related cost and EUR 40 million will be asset write-downs. EUR 71 million of the restructuring charges were booked in 2012, EUR 2 million in the first quarter of 2013 and the balance will be booked in the second quarter of 2013. In the first quarter of 2013, non-recurring charges related to 'Fit for Growth' mainly related to severance payments and external services.

The implementation may ultimately lead to a reduction of up to 600 positions globally. Kemira has initiated the co-determination negotiations according to each country's local legislation. Kemira had 4,662 employees worldwide at the end of March 2013 (5,181 at the end of June 2012).

Outlook (unchanged)

In 2013, Kemira expects its revenue in local currencies and excluding divestments to be slightly higher than in 2012 and its operative EBIT to be significantly higher than in 2012. The guidance for 2013 is defined as follows.

Kemira guidanceDefinition Slightly higher/lower from 0% to 5% or from 0% to -5% Higher/lower from 5% to 15% or from -5% to -15% Significantly higher/lowermore than 15% or less than -15%


Press and analyst conference and conference call

Kemira will arrange a press conference for analysts and the media starting at 4.00 pm (2.00 pm UK time) at Kluuvi, 3rd floor, Aleksanterinkatu 9, 00100 Helsinki. In the conference, Kemira's President and CEO Wolfgang Büchele will first present the results and then give a group level strategy update of Kemira, followed by segment specific strategy presentations by Petri Helsky, President, Paper segment, Randy Owens and President, Oil & Mining segment. Municipal & Industrial segment will be presented by Wolfgang Büchele.

The press conference will be held in English and will be webcasted at www.kemira.com . Webcast will be available at www.kemira.com also after the event. Presentation material will be available on Kemira's website at www.kemira.com under Investors in English and at www.kemira.fi in Finnish at about 3.30 pm.

Conference call in connection to the press and analyst conference

You can also listen to the conference live over the phone and attend the Q&A session via a conference call. In order to participate in the call, please dial +44 (0)20 7162 0077 (dial-in from US: +1 334 323 6201, Finland: +358 (0)9 2313 9201), code 931127 ten minutes before the conference begins.


For more information, please contact


Kemira Oyj
Tero Huovinen, Director, Investor Relations
Phone +358 10 862 1980

Kemira is a global chemicals company serving customers in water-intensive industries. We provide expertise and chemicals that improve our customers' water, energy and raw material efficiency. Our focus is on pulp & paper, oil & gas, mining and water treatment. In 2012, Kemira had annual revenue of EUR 2.2 billion and around 4,900 employees. Kemira shares are listed on the NASDAQ OMX Helsinki Ltd.
www.kemira.com



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