Capital Markets Day Kemira progressing our strategy for ... · Capital Markets Day September 21, 2017. Kemira Capital Markets Day 2017 ... Kemira –progressing our strategy for profitable

Kemira – progressing our strategy for profitable growth

Capital Markets Day

September 21, 2017

Kemira Capital Markets Day 2017

11.00 Registration & breakfast

11.30 President & CEO: Jari Rosendal

Pulp & Paper: Kim Poulsen

Industry & Water: Antti Salminen

12.45 Lunch

13.20 Oil & Gas: Pedro Materan

Sourcing: Thierry Blomet

CFO: Petri Castrén

14.35 Coffee break

14.50 Breakout sessions with the management (three groups)

16.05 Cocktails

17.00 End

Program (UK time):

Jari Rosendal

President and CEOPetri Castrén

CFO

Kim Poulsen

President, Pulp & Paper

Antti Salminen

President, Industry

& Water

Thierry Blomet

SVP, Sourcing

Pedro Materan

SVP, Oil & Gas

September 21, 2017Capital Markets Day 2

Today’s speakers

Jari Rosendal

President and CEO

with Kemira since 2014

Key prior positions:

• Outotec

– Member of the Executive Board

– Executive Vice President, President of

Americas Region

– President, Non‐ferrous Solutions Business Area

– President, Minerals Processing Division

• Relevant positions of trust:

• Chemical Industry Federation of Finland

– Member of the Board of Directors

• European Chemical Industry Council (CEFIC)

– Member of the Board of Directors

Petri Castrén

CFO



• Nokia Siemens Networks

– Head of Corporate Finance (Group Treasurer)

– Head of Corporate Development

• Nokia Corporation

– Head of Mergers & Acquisitions

– Various finance and business development

management roles


Today’s speakers

Kim Poulsen

President, Segment Pulp & Paper



• UPM-Kymmene

– Paper Asia, EVP and Group Executive Team Member

– Head of APAC, EVP and Group Executive Team

Member

– Senior Vice President, Plywood business

• Vitalis Gladius

– Owner and Senior Partner

• Paloheimo Group and Fenestra

– President and CEO

• Finnforest

– Several management roles

Antti Salminen

President, Segment Industry & Water



• Kemira

– Executive Vice President, Supply Chain

Management

• KONE

– Director, New Equipment Business, Asia Pacific

– Vice President, Delivery Process

• Capgemini Finland

– Managing Consultant


Today’s speakers

Pedro Materan

SVP, Global Oil & Gas,

Industry & Water



• Kemira

– SVP, RBU Oil & Mining, Americas

– Global Business Development and Global Sales

Manager, Oil and Gas

• Cytec Industries

– Global Marketing Manager for Oilfield

– Sales Manager, Americas for Phosphine Chemicals

(Oil, Mining and Textiles)

– Regional Technical Sales Manager for Water

Treatment

– Sales Rep for Water Soluble Polymers

Thierry Blomet

SVP, Sourcing



• PPG

– Director, Raw Material Purchasing EMEA

– Director, Indirect Purchasing EMEA

– Business Director – Industrial Finishes Europe

• Dupont

– Business Director – Coatings for mass production

industry


Kemira – progressing our strategy for profitable growth

Capital Markets Day

Jari Rosendal, President and CEO

September 21, 2017

GEOGRAPHIESSEGMENT SPLIT PRODUCTS

Kemira in briefFY2016: Revenue EUR 2,363 billion, Operative EBITDA EUR 302.5 million, margin 12.8%

25% Bleaching

and pulping

20%Polymers

20% Other:

e.g. defoamers,

dispersants,

and biocides

20%Coagulants

15% Sizing

and strength

Revenue by product category rounded to the nearest 5%

38%AMERICAS

1.USA

2.Canada

3.Brazil52%EUROPE

1.Finland

2.Sweden

3.Germany

10%APAC

1.China

2. Indonesia

3.South

Korea

62%Pulp &

Paper

38%Industry

& Water

CUSTOMERS

8,000 Sold-to customers

16,000 Ship-to customers

Examples of largest customers


#1 in water

treatment in

NA and

Europe

#1 in shale

in NA

#1 globally

London

New York City

Frankfurt

Paris

Shanghai

Singapore

Municipalities, e.g.

Our targets and actions for profitable growth


ORGANIC GROWTH• Investments in capacity expansion

• Seize opportunities in growth pockets

• Shale oil & gas business

• CEOR and oil sands

• Digitalization

• APAC

• R&D, new products

ACQUISITIONSVery selective approach

• Strategic and synergistic fit

• Accretive to profitability

• Reasonable valuation

EFFICIENCY• Manufacturing footprint

and utilization optimization

• BOOST – Operational

excellence

• Organizational efficiencies

with new structure

• Complexity reduction

• Efficient processes

OPERATING COST

DISCIPLINEPrudent cost culture

Above-the-market

growth and operative

EBITDA of 14-16%

Expansion of

pulp chemicals,

Oulu (FI)

Progress in profitable growth


AcquisitionOpening / expansion of site Operational efficiencies

Opening of Tarragona

coagulant site (ES)

Acquisition BASF

AKD emulsion business

Opening of EMEA

service center

Expansion of dry

and emulsion

polyacrylamide

(US)

Opening of

Nanjing (CN)

site

Closure of

Longview (US)

AkzoNobel’s

paper chemicals

acquisition

Acquisition of Soto

Industries (US)

Closure of

Soave (IT)

Start-up of Ortigueira

(BR) sodium chlorate site

and announcement of

Joutseno (FI) expansion

Acquisition

of Polymer

Services (US)

Botlek (NL)

modernization

BOOST operational

excellence program

launch

Bradford (UK)

expansion

San Giorgio (IT)

expansion

Closures of Ottawa (CA)

and Zaramillo (ES)

Closure of site

Q416

Transportation

agreement with

Odyssey

Q117

Odyssey go-live

in North America

Two segment

structure

operational

Q217

Q316

Q114

Q314

Q414

Q115

Q215

Q315

Q415

Q116

Q216

Q214

11.3%2013 operative

EBITDA

12.8%2016 operative

EBITDAQ317

Start-up of

Joutseno (FI)

chlorate

expansion

Kemira has managed to improve EBITDA even withthe downturn in the O&G market

Revenue

22292137

2373 2363 2420

2013 2014 2015 2016 LTM

Operative EBITDA and

operative EBITDA margin


EUR million EUR million

252 253

287303 297

11.3%

11.8%12.1%

12.8%

12.3%

2013 2014 2015 2016 LTM

Between 2014-2016, Oil & Mining revenue and operative EBITDA dropped EUR 70 million and EUR 30 million respectively

LTM = Last Twelve Months ending June 2017

Kemira’s relevant market expected to show healthy growth

Long-term drivers for growth, including:

• E-commerce drives the need for packaging material

• Growing middle class, increased standards of living

and urbanization leads to higher usage of water,

energy, tissue, and board

• Recycling and use of renewables leads to e.g. higher

usage of strength chemicals

• Regulation increases water treatment

• Scarcity of resources accelerates need to produce

more with less

Challenges

• Risks to global GDP growth

• Decline in demand for printing and writing paper

demand 2017 2022

Market growth by business areas: Pulp & Paper 1%, Water treatment 2-3%, Oil & Gas 5-6% p.a.


2-3%

3-4%

CAGR

2017-2022

~20

~23

+3%

2-3%

Management estimation based on various sources

Americas

EMEA

APAC

Relevant target market (EUR billion)

APAC is driving future market growth

• APAC market is the largest and fastest

growing market

• Our business in APAC has been growing and

EBITDA turned to positive after 2014

– New greenfield manufacturing site in Nanjing,

China in 2014 and acquisition of AkzoNobel’s

paper chemicals in 2015 have helped to improve

profitability

– We are market leader in Pulp & Paper with ~10%

market share

– Industry & Water continue to grow, albeit from

small base


* H1 2017 annualized

2011 2013 2015 H12017*

2011 2013 2015 H12017*

Operative

EBITDA

Revenue

We innovate for the future through customer

collaboration, partnerships and open innovation.

We use digitalization to improve our own

performance as well as the services offered to

customers.

250 R&D experts create new innovations

in R&D centers in Finland, China and US.

348 patent families

Over 1,200 patents

Innovation drives growth – EUR 220 million revenue from recent innovations

25% Bleaching

and pulping

20%Polymers

20% Other:

e.g. defoamers,

dispersants,

and biocides

20%Coagulants

15% Sizing

and strength

Products

EUR 2.4bn

Innovation sales on track – pipeline strongSales from new products (launched within the last 5 years)

Best selling new

products in 2016

1. Oil & Gas – Freeze

tolerant friction reducer

2. Oil & Gas –

Stabilizing additives for

CEOR polymers

3. Pulp & Paper –

Strength for tissue


5%

7%

8% 8%

9%

0

50

100

150

200

250

300

2012 2013 2014 2015 2016

of Group’s revenue from new products

BOOST update - targeting EUR 20-30 million of savings and EUR 50 million of inventory reduction

2,300products

63manufacturing

sites

13,000suppliers

200warehouse

locations

16,000ship-to-

customers

250,000orders per

year

BOOST is about improving

competitiveness through

efficiency

Majority of savings will

result from logistics

• Kemira spends annually

around EUR 170 million on

road transportation

• Sourcing of logistics by

Odyssey expected to yield

significant savings of road

transportation cost

• Odyssey roll-out done in

North America in April and

Europe to follow

Distribution

center

KemiraSupplierCustomer

Kem

Connect

Customer

Service

Our key actions to improve margins

2015 2016 2017 LTM Acquisitionsynergies

Group Pulp &Paper

BOOST -operationalexcellence

Industry &Water

Industry &Water

Industry &Water

Volatility Mid- tolong-term

target


12.3%

Operative EBITDA

margin 14-16%

New

bleaching

chemical

capacity

(Joutseno,

Finland)

Optimization

of operations:

majority of

savings in

logistics

Oil sands

Chemical

Enhanced

Oil Recovery

12.1% Efficiencies

from new

two segment

structure

12.8%

Estimated end of 2017 run-rate 100% 100% 75% Low 25% Low Low

Full run-rate by EO 2017 EO 2017 2018 1-2 yrs 2-3 yrs 2-5 yrs 3-5 yrs

AkzoNobel’s

paper

chemicals

business

Advanced

Water

Treatment

Market and

raw material

related

volatility


• Our first priority is safety of employees and we are happy

to report that everyone is safe

• Multiple oil refineries and chemical providers impacted

short-term by consequences of flooding

• Only limited short-term direct impact on Kemira

– Our assets were not damaged

– Customer operations not materially impacted

• Indirect impact also limited – full recovery depends on

normalization of supply chain

– Availability of raw materials partially limited

– Disruptions in logistics

Hurricanes Harvey and Irma impacting chemical industry


Primary business / company (primary region)

Board and paper chemicals / Soto (Canada) Q3/2013

Polymer manufacturer / 3F (global) Q4/2013

Board and paper chemicals / BASF AKD (Europe) Q2/2014

Board and paper chemicals / Akzo Nobel (global) Q2/2015

Board and paper chemicals / Soto (US) Q3/2015

Oil field services / Polymer Services (US) Q4/2015

Selective acquisitions possible if strategic fit and financials reasonable

Acquisition criteria

• Must improve operative EBITDA margin in second full year after

closing

• Must be synergistic and strengthen market position and/or our

competencies


• Investments done in profitability enhancing growth areas

– New chlorate plant in Brazil 2016

– New chlorate line in Finland in 2017

– Capacity additions related to AkzoNobel acquisition

– Polymer capacity additions

• Balanced cash flow and capex

– Good maintenance capex control

– Prudent strategic prioritization of investments

– Optional investments / M&A in profitable growth areas

– Net working capital optimization

Balanced cash flow and capex


Progressing our strategy for profitable growth

GROUP’S MID- TO LONG-TERM TARGETS

Above-the-market growth

Operative EBITDA 14-16%

Gearing below 60%

Dividend policy: stable and competitive dividend

Balanced cash flow

and capex

Increase

efficiency

Grow by investing,

innovating and capturing

market opportunities

Pulp & Paper – driving growth as market leader

Capital Markets Day

Kim Poulsen, President, Pulp & Paper

September 21, 2017

REVENUE BY

PRODUCT CATEGORY

REVENUE BY CUSTOMER

TYPE AND MARKET GROWTH

REVENUE AND

OPERATIVE EBITDA

Pulp & Paper – market leader with solid track record


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

MARKET ENVIRONMENT REVENUE BY GEOGRAPHIES AND

MARKET GROWTH BY REGION

CUSTOMER EXAMPLES

1047 10681170

1417 1457

109130

137171

195

2012 2013 2014 2015 2016

35%Americas

50%EMEA

15%APAC

35%Bleaching

& pulping

25%Sizing & strength

20%Defoamers,

dispersants,

biocides and other

process chemicals

10%Polymers

10%Other

40%Pulp

20%Printing &

writing papers40%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) #1

Ecolab (paper) #5

Customer interview with UPM

2016 CMD

• UPM was one of our TOP 5 clients

• Jyrki Ovaska EVP, Technology at UPM

interviewed by video

• Mr. Ovaska’s feedback about UPM’s business

relationship with Kemira

– Kemira’s international footprint matches

UPM’s locations

– Comprehensive product portfolio is attractive

– Further potential for Kemira to increase share

of UPM’s business

– Request for more collaboration to find new

innovations and efficiencies

2017 CMD

• UPM is now one of our TOP 3 clients

• Mr. Ovaska’s feedback regarding change

from 2016 to 2017 visible on video


Our winning formula to continue growth


Above-the-market

growth

and operative

EBITDA

14-16%

Improve customer experience

Maximize capacity

utilization

Manage fixed costs

Invest in growth and R&D

• Capacity additions

• 9 new products in 2016

• New mgmt. structure

• Employee engagement –

15/16 survey items

improved since 2015

• TOP 50 customers are EUR 1bn

• Customer satisfaction to 98%

• Bleaching ran flat out 9 years

• Paper chemicals varying

• H1 2017 business overheads

below 2016 level

• Group: 240 products out

• Target to reduce by 200 in 2017

Reduce complexity

Enhance

performance culture

Board and paper production shifting to emerging markets

Growth of board

and paper production

by region 2015-2030

• 55mt growth in APAC by

2030

BIGGEST PRODUCERS ARE:

China, USA, Japan, Germany,

India, Sweden, Korea, Canada,

Finland, Brazil

BIGGEST GROWTH

AREAS ARE:

China, India, Indonesia, Brazil,

Russia, Vietnam

North America

2015: 82 mt

2030: 75 mt

Latin America

2015: 21 mt

2030: 31 mt

W. Europe

2015: 85 mt

2030: 78 mt

E. Europe

2015: 18 mt

2030: 26 mt

China

2015: 106 mt

2030: 139 mt

Africa

2015: 4 mt

2030: 6 mt

Oceania

2015: 4 mt

2030: 4 mt

Japan

2015: 26 mt

2030: 21 mt

Rest of Asia

2015: 55 mt

2030: 82 mt

TOTAL BOARD & PAPER PRODUCTION:

2015: 402 million tons

2030: 461 million tons

CAGR%: around 1 % / annum

Source: Pöyry

Strong market positions and strategic investments

REGION MARKET POSITION GROWTH TREND GROWTH STRATEGY

EMEA

North America

APAC

South America

#1

#2/3

#1

#3

Exceptional customer

experience

Transformation from paper

to board

Continue to grow with major

players (TCM) and assess

future investments

Assess future bleaching

investments

TCM = Total Chemistry Management

Market position strengthened through successful acquisition

• AkzoNobel’s paper chemicals acquired

in May 2015

– Target initially EUR 15 million

– Run-rate ahead of plan, close to EUR 20

million

• Acquisition strengthened our position

especially in APAC

– 4 of 6 sites acquired were in APAC

• APAC capacity addition in Nanjing,

China executed well and ramping up

according to plan


Hallam

– Australia

Pasuruan

– Indonesia

Wellgrow

– Thailand

Gunsan

– KoreaNanjing

– China

Yanzhou

– China

Acquired site

Kemira site

We have become market leader in APAC

Pulp & Paper relevant chemicals market 2017 EUR million

• Board and paper production in APAC

will be bigger than Europe and North

America combined by 2020

• >90% of global board and paper

production growth in APAC

• Kemira now #1 with close to 10%

share in APAC

– Revenue doubled to around

EUR 200 million in 3 years

• Fragmented market provides good

potential for profitable growth

• Continue to grow revenue and market

share 0 2000 4000 6000

South America

APAC

North America

EMEA


0-1%

-1-0%

2-3%

2-3%

CAGR

2017- 2022

Source: Pöyry, management estimation

Strong demand in pulp market creating growth opportunities

• New pulp mill projects are driven by

increasing demand for board and tissue

– Food and liquid packaging board is

growing particularly fast in Asia

– Pulp is produced close to wood sources and

then shipped to board, paper, and tissue mills

– Growth in board = 1 new pulp mill per year

• Multiple pulp mill projects realised and

expected in Northern Europe creating

opportunities for Kemira to grow with

the market

• In addition, a few large scale pulp mill

projects expected in South America


Confirmed new capacity / debottlenecking 2016-2020

Possible new mills 2020-2022

Successful value creating investments – case Joutseno

Kemira bleaching chemicals revenue growth

• Kemira’s capacity in sodium chlorate was fully

utilized, hence the need for additional

capacity

• Capacity doubled in Joutseno with around

EUR 50 million investment

• Investment realized according to budget and

start-up was ahead of schedule in early

September 2017

• Targeting maximum capacity utilization by

H2 2018

– Part of the production will be shipped to APAC

to support the growth in the region2014 2015 2016 2017 H1 ann.


+7%

+10%+5% +3%

+6%

CAGR

Industry & Water – stronger platform for profitable growth

Capital Markets Day

Antti Salminen, President, Industry & Water

September 21, 2017

Industry & Water –

stronger platform for

profitable growth

• Profitable and stable underlying

business

• New structure creates growth

and efficiency opportunities

• Innovation supporting growth

in selected areas

MARKET POSITION

220227

231 228238

248

Q1 Q2 Q3 Q4 Q1 Q2

REVENUE BY

PRODUCT CATEGORY

REVENUE BY APPLICATION

TYPE AND MARKET GROWTH

Industry & Water – strong positions in chosen categories

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

REVENUE AND ORGANIC

GROWTH (Y-O-Y)EUR million

Capital Markets Day 33

REVENUE BY GEOGRAPHIES AND

MARKET GROWTH BY REGION

CUSTOMER EXAMPLES

45%Coagulants

35%Polymers

20%Other products

such as

defoamers

and biocides

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

growth

September 21, 2017

40%Americas

55%EMEA

5%APAC

70%Water treatment

15%Other15%

Oil & Gas

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

growth

Municipal (40%), customer examples

Amsterdam

Barcelona

Frankfurt

London

Oslo

Paris

Stockholm

Los Angeles

Montreal

New York City

Toronto

Melbourne

Shanghai

Singapore

Industrial (60%), customer examples

Market share in water

treatment in Europe and

North America

Market share in polymers

used for friction reduction

in US shale fracking

>30%

30%

-7% -5% -5% 0% +6% +9%

2016 2017

REVENUEEUR million

956 906

447 485

2015 2016 H1 2016 H1 2017

116107

54 52

12.2% 11.8% 12.2% 10.8%

2015 2016 H1 2016 H1 2017

Returning to growth in 2017

• In 2016, financials impacted by market

turmoil in shale industry

• H1/17 revenue growth looks promising

– Growth +9%, driven by Oil & Gas

– Volume growth in water treatment +2%

• Profitability was impacted by higher raw

material prices

• Profitable growth opportunities:

– Selected applications within Oil & Gas,

such as CEOR and oil sands, as well as

shale fracking

– Advanced Water Treatment (AWT)

– Water treatment in APAC


+9%

OPERATIVE EBITDA AND OPERATIVE

EBITDA MARGINEUR million

September 21, 2017

New structure creates growth and efficiency opportunities

• Leveraging the full potential of new combined

segment

– Full geographical reach in all regions

– Global polymer expert network

– Water treatment expertise for O&G and Mining

• Structural change means faster decision making

• More efficient development and roll-out of new

innovations

• Important part of segment’s profitability improvement

– On Group-level cost savings EUR 15-20 million


Oil &

Mining

Municipal

& Industrial

70%Water

treatment

15%Oil & Gas

Industry

& Water

15%Other

applications

September 21, 2017

REVENUE IN GROWTH INITIATIVESEUR million

24 28

0

20

40

60

80

2015 2016

Water Treatment Oil & Gas

Profitable growth opportunities ahead...

• H1 2017 showed good volume growth

– +2% in water treatment

– Around +50% in Oil & Gas

• Multiple initiatives ongoing to boost growth in both businesses


BUSINESS AREA REGION GROWTH INITIATIVES IN 2015-2017

WATER

TREATMENT

EMEA Desalination

BioGas

Sludge dewatering

Middle East and Africa

NA Odor control

Sludge dewatering

APAC Deep sludge dewatering

OIL & GAS GLOBAL CEOR

Oil sands in Canada

+65%

September 21, 2017

…fueled by strong innovation pipeline


>20Continuous

ideas inflow

Projects under evaluation

Enhanced Oil Recovery

Projects under development and early commercialization Projected 10-yr NPV

8

2

3

12

1

EUR

650 million

AWT = Advanced Water Treatment

Oil sands

Shale oil & gas

Solid liquid separation (incl. AWT)Sludge dewatering, nutrients recovery, mining processes

Desalination, re-use & disinfection(incl. AWT)

2

3

12

1

September 21, 2017

# of

projects

EUR 110 million, 12% of Industry & Water revenue from innovation in 2016

The next generation of sludge treatment

will focus on customer performance and

value created

KemConnect Smart Dewatering combines

a complete chemicals portfolio, continuous

chemistry optimization and real-time

monitoring to a new business model

Dewatering Today Smart DewateringTomorrow

Innovation case – KemConnect Smart DewateringADVANCED WATER TREATMENT CASE EXAMPLE

Disposal

Cost

KemConnect

Service Fee

Disposal

Cost

Customer

Net Savings

Chemical

Cost

Stronger platform for

profitable growth

• Strengthened business in growing

market

• New structure enables greater agility and

higher profitability

• Profitable growth opportunities driven by

innovation

• Oil & Gas returned to growth

Oil & Gas –well positioned for growthin niche areas

Capital Markets Day

Pedro Materan, SVP, Oil & Gas

September 21, 2017

85% of business

in polymers

200 Customers

Oil & Gas – small and focused teamDesigned to extract more


DESIGNED

TO EXTRACT

MORE

A unique combination

of innovative chemicals

and application

knowledge that

improves process

efficiency and yield in

oil & gas applications

152 Revenue in

EUR million (LTM)

30 Global

commercial

team

75%Revenue in Americas

90% On upstream and in

water related applications


KEMIRA OIL & GAS REVENUE

Resilient business set for growth

• Growing market demand with our

selective market diversification assuring

growth

• Kemira’s offering

– Process efficiencies: polymers that reduce

energy consumption by 60% in shale oil

fields

– Cost reduction: higher concentrated

liquids that make offshore oil recovery

more cost effective (CEOR)

– Addressing environmental regulations:

tailing treatment in oil sands

• New innovative technologies driving

expansion


25%Other

50%Shale fracking

25%Oil sands and

Chemical Enhanced

Oil Recovery

Revenue

EUR 152 m(LTM)

0

50

100

150

200

2013 2014 2015 2016 LTM

+47%in H1/17

Oil

price

Figures rounded to closest 5%


Well positioned and growing into adjacent areas

New global organization concentrating on

extraction areas


Oil & Gas

revenue

Upstream

Reaching

Midstream

Producing

Downstream

Transporting

Downstream

Processing

90% 90% 10%

Area Oilfield

Chemicals

Oilfield

Services

MARKET

POTENTIAL

(AVAILABLE)

Around €1.5bn Around €1bn

APPLICATIONS Drilling

Cementing

Shale

Oil sands

Production

CEOR

CUSTOMERS Service

companies

Operators

VALUE

PROPOSITION

Manufacturing +

Innovation

Solutions

GROWTH

(KEMIRA’S)

Moderate Strong

KEMIRA

• Provides unique chemistries, friction reducers,

that reduce energy needed during hydraulic fracturing

• Volume growth over 100% in H1 2017

• Differentiating from competitors with innovative products

Shale Market

• Polymer market size +200M

EUR and growing at double

digit today

• Polymer more favorable

product based on

cost/performance


Our innovations make shale industry more efficient

KEMIRA

Competitor A

Competitor B

Competitor C

Others

Market shares

in polymers used

for fracking

#1 market position

with over 30%

market share

KEMIRA

• Kemira’s MaxXtract solution tailored specifically to customer

needs, incorporating chemistry, equipment and services

• Kemira’s knowhow in polymers helps oil producers

• Potential for > EUR 100 million revenue in 5 years

Substantial long-term growth

potential within existing

CEOR projects and

through new projects

Chemical Enhanced

Oil Recovery market

• CEOR market size EUR 1bn of

which EUR 500 million

accessible to Kemira

• Market growth estimated to be

5% driven by decline of

production from existing fields


Long-term growth potential in CEOR

KEMIRA

• Offers total solutions to reduce environmental concerns

• Customer base expanding

• Revenue has grown to above EUR 20 million in 2 years

• Target to more than double current revenues in 2-3 years

Companies operating in oil sands market (examples)

Oil sands market

• Market size is around

EUR 400 million

• Projects are capex-heavy

but developed projects are

considered as sunken costs


Oil sands has grown from 0 to above EUR 20m in 2 years

OIL & GAS REVENUE GROWTH

EUR million

Building on current performance for future growth

Strategic priorities

• Strengthen position and keep growth

momentum

• Increase margins

• Hire and develop our people

• Innovate for further growth

– Introduction of new products

– Field trials in new key applications


75%Americas

25%EMEA

57

83

H1 2016 H1 2017

+47%

New business –

EUR 30 million

Niche position in

niche market

Oil & Gas well positioned for growth in niche areas


Diversification –

EUR 152 million (LTM)

Growing in shale,

oil sands and CEOR

Bigger and better

Strong player in three

core areas (shale, oil

sands, CEOR), including

service capabilities

2017 Phase II 2022 Phase III2009 Phase I

Oil & Mining Industry &

Water:

Global

Oil and Gas


Sourcing – contributing to profitability improvement

Capital Markets Day

Thierry Blomet, SVP, Sourcing

September 21, 2017

Strategic sourcing improves cost competitiveness, service performance, and reduces risk


VARIABLE COST SPLIT 2016

EUR 1.3 billion

EXPOSURE TO OIL RELATED

RAW MATERIALS

TOP 10 RAW MATERIALS

BY SPEND

1. Sodium hydroxide

2. Acrylonitrile (OR)

3. Colloidal silica dispersion

4. Fatty acid

5. Aluminium hydrate

6. Amines (OR)

7. Alpha olefin (OR)

8. Acrylic ester (acrylic acid and

methyl acrylate) (OR)

9. Petroleum solvents (OR)

10.Sodium chloride

Top 10 account for almost 50%

of Kemira’s raw material spend

30%Oil related

70%Not oil

related

65%Raw

materials

15%Electricity

& energy

20%Logistics

Sourcing continues to improve Kemira’s performance

Single source dependency% of total raw material spend

0

5

10

15

20

25

30

35

2012 2013 2014 2015 2016

Payment termDays

0

5

10

15

20

25

30

35

40

45

50

2012 2013 2014 2015 2016


REDUCE

RISK

IMPROVE

WORKING

CAPITAL

Improved

by 15 days

Improved

over 20ppt

Sourcing helps business to improve profitabilityin changing markets

Raw material availability Price dynamics


Supply / demand impacted by investments,end-markets and disruptions

Long cycles of oversupply

or tightness driven by

producers’ investments

and industry demand

Our solution:

1. Contracted supply vs.

spot is critical

2. Timing, and length of

contracts are key to

competitiveness

3. Multiple sources required

Supply disruptions are

typical in chemical industry


-50%

-30%

-10%

10%

30%

50%

70%

90%

Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17

WTI Crude Oil Jet Kero 55

US Propylene US Ethylene

Acrylonitrile Acrylic Acid

Feedstock and raw material price dynamicsChange (y-o-y) in key feedstock and raw material prices in the US


Around 30% of raw material

spend is connected to volatile

vertically integrated

petrochemical value chain

Most feedstock are globally

traded commodities

significantly influenced by

FX and cross-region trading

arbitrage

Our solution:

1. Value-chain cost

modeling

2. Agile price

managementKey oil related raw materials

Key feedstock

WTI +68%Propylene +33%

Acrylonitrile +18%

Better sourcing, through strategic management of over EUR 1bn spend, is contributing to profitability improvement

Reduce single source dependency

Increase preferred vendors spend

Drive supplier relationship strategically

Single source exposure< 5% of total raw material spend

Preferred vendors share> 65% of total indirect spend

Supplier initiatives> EUR 5 million savings

Sourcing fixed cost< 0.3% of Kemira revenue

Digitalize and automate to increase efficiency

Actions Targets

Kemira continues to grow supported by value creating investments

Capital Markets Day

Petri Castrén, CFO

September 21, 2017

PULP & PAPER

11.5% 11.8% 11.7% 12.1%

13.4% 13.0%

2012 2013 2014 2015 2016 LTM

MUNICIPAL & INDUSTRIALINDUSTRY & WATER

Both segments targeting 14-16% operative EBITDA

• Pulp & Paper has gradually improved its margin towards 14-16% range

• Raw material price pressure was visible in both segments in H1 2017


Mid-to

long-term

target

Target

14-16%

10.4% 10.4%

12.3% 12.2% 11.8%11.1%

2012* 2013* 2014* 2015* 2016 LTM

Target

14-16%

Mid-to

long-term

target

9.3% 10.4%12.1%

13.7% 14.9%

2012 2013 2014 2015 2016

OIL & MINING

12.6%10.5%

12.7%9.6%

5.9%

2012 2013 2014 2015 2016


* Figures are sum of M&I and O&M segments

VARIABLE COST VS SALES PRICE TREND

Raw material costs and sales price correlation


• Strong correlation between sales prices and variable costs

• In the history, the lag has been around 2-3 quarters

-150

-100

-50

0

50

100

150

200

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Brent oil, USD Sales prices* Variable costs* *) 12-month rolling change vs previous year in EUR million

Profitability impacted by net change of sales prices and variable costs

• In 2016, net change of sales prices

and variable costs compared to 2015

was zero

• In H1 2017, clear headwind

– Net impact of sales prices and variable

costs on EBITDA was around EUR -36

million

– This is being mitigated by price increases

• We expect headwind to ease in the

coming quarters

Sales prices and variable costs on

EBITDA level (change y-o-y)

9

5

-3-10

-16 -20

-9

-18

-26-23

-16

-4

-18

-23 -23

-13

0

16

-30

-20

-10

0

10

20

Q1 Q2 Q3 Q4 Q1 Q2

2016 2017

Net impact on EBITDA (sales prices-variable costs)

Sales prices

Variable costs


134139 146

182

213

2012 2013 2014 2015 2016 2017

Investing in value creating growth

Recent largest value creating investments

• New chlorate plant in Brazil and new chlorate

line in Finland

• Capacity additions due to integration of acq.

• Polymer capacity in Italy and UK

CAPEX guidance and return criteria

• In 2018, depending on timing of

opportunities, EUR 160-200 million

– Includes capacity expansion in Oil & Gas

• Thereafter, around 5-6% of revenue

– Flexibility maintained for selected major

expansion projects

• Expansion projects in strategic investment

areas with sufficient financial returns

Capital expenditure excluding acquisitionsEUR million


Expansion Improvement Maintenance

Around

EUR 200m

2017 2018 2019 2020 2021 2022 2023 2024

EIB NIB Bilaterals Bonds Undrawn RCF Others

Debt portfolio is well diversified

Net debt / operative EBITDA and Gearing Gross debt maturity profile, end of Q2 2017 EUR million


127

80

110

150

205 200

42% 41% 42%

54% 54%

61%69%

2012 2013 2014 2015 2016 H12016

H12017

1.9x2.1x 2.1x2.2x1.8x 2.6x2.3x

532m 758m456m 486m 634m642m 690m

400249m297m (r12m)

252m 253m 303m287m 298m

Net debt

OperativeEBITDA

Continue to grow supported by value creating investments

Deliver higher profitability

Efficient capital

allocation and returns

Improve cash flow

1

2

3

GROUP



Gearing below 60%

Dividend policy:

stable and competitive dividend

Group’s mid- and long-term

financial targets

CEO’s closing remarks

GROUP



Gearing below 60%

Dividend policy:

stable and competitive dividend

What has changed since 2016 CMD

• Oil & Gas is back on track

• Sales price decline stopped

• Organizational structure streamlined –

leaner and more agile

• Expansion investments completed

• BOOST progressed

• R&D – new products launched

Group’s mid- and long-term

financial targets

Appendix

Key figures – 2017 vs 2016

EUR million Q2 2017 Q2 2016 Δ% H1 2017 H1 2016 Δ%

Revenue 617.2 587.8 +5 1,227.3 1,170.5 +5

Operative EBITDA 77.1 78.9 -2 146.1 151.7 -4

margin 12.5% 13.4% - 11.9% 13.0% -

Operative EBIT 43.6 46.6 -6 78.6 87.5 -10

margin 7.1% 7.9% - 6.4% 7.5% -

Finance costs, net -7.7 -0.3 - -14.4 -6.3 -

Earnings per share, EUR 0.12 0.17 -29 0.24 0.33 -27

Cash flow from operations 28.6 57.0 -50 40.8 83.2 -51

Capex excl. acquisitions 45.2 43.3 +4 82.1 74.7 +10

Net debt 758 690 +10 758 690 +10

Gearing, % at period-end 69 61 - 69 61 -

Inventories 227 214 +6 227 214 +6

Personnel at period-end 4,849 4,873 0 4,849 4,873 0


Pulp & Paper

EUR million

Q2

2017

Q2

2016 Δ%

H1

2017

H1

2016 Δ% 2016 2015 Δ%

Revenue 368.9 361.1 +2 741.1 723.5 +2 1,457.3 1,417.3 +3

Operative EBITDA 47.8 49.3 -3 93.8 97.2 -3 195.3 171.0 +14

margin 13.0% 13.7% - 12.7% 13.4% - 13.4% 12.1% -

Operative EBIT 25.7 28.9 -11 49.6 57.1 -13 111.6 96.8 +15

margin 7.0% 8.0% - 6.7% 7.9% - 7.7% 6.8% -

Capital expenditure 35.2 25.8 +37 65.0 40.6 +60 125.1 240.1 -48

Cash flow after investing

activities

8.9 59.3 -85 -14.0 58.6 - 105.7 -63.2 -


Industry & Water

EUR million

Q2

2017

Q2

2016 Δ%

H1

2017

H1

2016 Δ% 2016 2015* Δ%

Revenue 248.3 226.7 +10 486.1 447.0 +9 906.0 955.8 -5

Operative EBITDA 29.3 29.6 -1 52.3 54.5 -4 107.2 116.3 -8

margin 11.8% 13.1% - 10.8% 12.2% - 11.8% 12.2% -

Operative EBIT 17.9 17.7 +1 29.0 30.4 -4 58.5 66.3 -12

margin 7.2% 7.8% - 6.0% 6.8% - 6.5% 6.9% -

Capital expenditure 10.0 17.6 -43 17.1 32.3 -47 85.5 64.9 32

Cash flow after investing

activities

3.3 5.1 -36 12.5 6.5 +90 35.6 48.9 -27


* Sum of Oil & Mining and Municipal & Industrial segments.

Revenue split by countryFY 2016


AMERICAS

APAC

EMEA

USA 27%

Canada 5%

Brazil 3%

Uruguay 2%

Other Americas 1%

Finland 14%Germany 6%

Sweden 6%

Poland 3%

UK 3%

Spain 2%

Other APAC 6%

Indonesia 1%

China 3%

Other EMEA 8%

Norway 2%

Russia 2%

Netherlands 2%

France 2%

Italy 2%

KEMIRA REVENUE DISTRIBUTION

2016

KEMIRA COST DISTRIBUTION

2016

Revenue and cost distribution per currency


• Currency exchange rates had around EUR +4 million impact on the operative

EBITDA in Q2 2017 and around +5 million in H1 2017.

• Guidance: 10% change in our main foreign currencies would approximately have

EUR 10 million impact on operative EBITDA on an annualized basis

EUR

44%

USD

35%

CAD 4%

BRL 3%

CNY 3%

Others 11%

EUR

41%

USD

31%

CAD 4%

SEK 8%

CNY 4%

Others 12%

Key figures and ratios – 5-year summary

EUR million (except ratios) 2012* 2013 2014 2015 2016

Revenue 2,240.9 2,229.1 2,136.7 2,373.1 2,363.3

Operative EBITDA 249.4 251.9 252.9 287.3 302.5

of which margin 11.1% 11.3% 11.8% 12.1% 12.8%

Operative EBIT 155.5 164.2 158.3 163.1 170.1

of which margin 6.9% 7.4% 7.4% 6.9% 7.2%

Cash flow from operations 176.3 200.3 74.2 247.6 270.6

Capital expenditure, excluding acq. 134.1 133.5 140.6 181.7 212.6

Gearing at period-end 42% 41% 42% 54% 54%

Inventories 182 170 197 207 217

Personnel at period-end 4,857 4,453 4,248 4,685 4,818


* Restated figures reflect the change of IAS 19, Employee Benefits

Per share figures – 5-year summary

2012 2013 2014 2015 2016

Earnings per share, EUR 0.12 -0.21 0.59 0.47 0.60

Cash flow from operating activities per share, EUR 1.16 1.32 0.49 1.63 1.78

Equity per share, EUR 8.20 7.32 7.57 7.76 7.68

Dividend per share, EUR 0.53 0.53 0.53 0.53 0.53

Share price, EUR, end of period 11.81 12.16 9.89 10.88 12.13

Market capitalization, EUR million 1,796 1,849 1,504 1,654 1,848

Number of shares, million (excl. treasury shares) 152.0 152.0 152.1 152.1 152.4

P/E ratio 98.4 - 16.7 23.3 20.2

P/CF ratio 10.2 9.2 16.7 6.7 6.8

P/B ratio 1.4 1.7 1.3 1.4 1.6

Dividend yield, % 4.5 4.4 5.4 4.9 4.4


Income statement (IFRS)

EUR million 2016 2015

Revenue 2,363.3 2,373.1

Other operating income 5.1 7.1

Operating expenses -2,084.2 -2,116.4

Depreciations, amortizations and impairments -137.2 -131.2

Operating profit 147.0 132.6

Finance costs (net) -19.1 -30.8

Share of profit or loss of associates 0.1 0.3

Profit before tax 128.0 102.1

Income taxes -30.1 -24.9

Net profit for the period 97.9 77.2

Equity owners of the parent 91.8 71.0

Non-controlling interests 6.1 6.2

Earnings per share for net profit attributabe to the equity owners of the parent company

(EUR per share)

0.60 0.47


Balance sheet (IFRS)


Goodwill* 522 518

Other intangible assets 116 135

Property, plant and equipment 916 815

Shares and other investments 268 357

Inventories* 217 207

Receivables 409 411

Cash and cash equivalents 173 152

Total assets 2,621 2,595

Equity 1 183 1 193

Interest-bearing liabilities 807 794

Interest-free liabilities 631 608

Total equity and liabilities 2,621 2,595


* Key audit matter

Cash Flow statement (IFRS)


Net profit for the period 98 77

Total adjustments 187 189

Change in net working capital 29 21

Finance expenses -20 -27

Income taxes paid -23 -12

Net cash generated from operating activities 271 248

Purchases of subsidiaries and business acquisitions 2 -123

Capital expenditure -213 -182

Proceeds from sale of assets 37 3

Change in long-term loan receivables 1 0

Cash flow after investing activities 98 -54


Cash flow – profitability improvement is the main driver

• Cash flow from operations has

improved nicely 2011-2016

• Main driver for cash flow is profitability

target of 14-16% operative EBITDA

• Net Working Capital at good level,

around 8% of 2016 revenue

– BOOST expected to improve inventories,

revenue growth impacting NWC to other

direction

• No major change expected in Finance

expenses

• Taxes paid expected to increase

– Underlying tax rate 22-25%


Operative EBITDA 303 287

Reported EBITDA 284 264

Change in NWC 29 21

Finance expenses -20 -27

Taxes paid -23 -12

Other items 1 2

Cash flow from operations 271 248


Kemira offers stable and competitive dividends

• Kemira’s dividend policy is to pay

a stable and competitive dividend

• Kemira has paid dividends every year

since listing of shares in 1994

• Kemira offers attractive dividend yield

– Average dividend yield in relevant indices

• EuroStoxx Chemicals 2.3%

• OMX Helsinki 25 3.5%

0.53 0.53 0.53 0.53 0.53 0.53

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

2011 2012 2013 2014 2015 2016


Dividend per share Dividend yield

Kemira’s dividend yield calculated using the share price at year-end

Addressing fixed and variable costs

Operating expenses in 2016

EUR 1.9 billion• Kemira is actively reducing its cost base

• New two segment structure and related

reorganization is purely addressing

fixed costs

– Savings target EUR 15-20 million

– Run-rate by end of 2017

• BOOST program, savings mostly in

logistic costs

– Savings target EUR 20-30 million

– Run-rate in 1-2 years

– In addition, inventory reduction target of

EUR 50 million


10% Electricity and energy

30% Fixed costs

45%Raw

materials

15% Logistics

Pulp & Paper – Technology and market leader


Value chain part covered by Kemira

RAW

MATERIALSINTERMEDIATES PRODUCTS APPLICATIONS

CUSTOMER

IDUSTRIESCUSTOMERS

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

Main competitors: BASF, Akzo Nobel, Solenis, Ecolab, SNF

Industry & Water – Technology and market leader in water treatment as well as in niche applications in oil & gas


RAW

MATERIALSINTERMEDIATES PRODUCTS APPLICATIONS SALES CHANNEL CUSTOMERS

Acrylonitrile

Acrylic acid

Sulfuric acid

Hydrochloric acid

Aluminium hydrate

Iron ore

Pickling liquor

Copperas

Various monomers

Acrylamide

Polymers (EPAM, DPAM)

Al Coagulants

Fe Coagulants

Dispersants &

antiscalants

Biocides

Emulsifiers

Defoamers

Formulations

Raw water & waste water treatment

Sludge treatment

Friction reduction

Enhanced oil

recovery

Tailings treatment

Mining processes

Direct sales

Distributor/reseller

Service companies

Municipalities

Private operators

Industrial customers

Pumpers

Oil & Gas operators

Service companies

Mine operators

Cationic monomer

Main competitors:

Coagulants: mainly local small companies, Feralco, USALCO

Polymers: SNF, Solvay, Ecolab, Solenis, BASF

Value chain part covered by Kemira

Kemira – largest shareholders and Board of Directors

Shareholders on August 31, 2017

% of shares

1. Oras Invest 18.2%

2. Solidium (owned by State of Finland) 16.7%

3. Varma Mutual Pension Insurance

Company

3.4%

4. Ilmarinen Mutual Pension Insurance

Comp.

2.3%

5. Kemira Oyj 1.9%

Total number of shares 155,342,557

Foreign ownership of shares 24.5%

Total number of shareholders 35,595

Kemira Board of Directors


Jari Paasikivi, Chairman

Member since 2012

Oras Invest Oy, CEO

Kerttu Tuomas

Vice Chairman

Member since 2010

Wolfgang Büchele

Member in 2009-

2012 and since 2014

Kaisa Hietala

Member since 2016

Timo Lappalainen

Member since 2014

Shirley Cunningham

Member since 2017

Kemira’s Management Board


Jukka Hakkila, Chief Legal Officer, acts as secretary of Management Board and Board of Directors

Pulp & Paper

Kim Poulsen

Operational

Excellence

Esa-Matti Puputti

Human Resources

Eeva Salonen

Industry & Water

Antti Salminen

CFO

Petri Castrén

CTO

Heidi Fagerholm

President and CEO

Jari Rosendal

Data about shale oil and gas industry

US rig count (quarterly avg) and oil price(WTI)

0

10

20

30

40

50

60

70

80

0

200

400

600

800

1000

1200

1400

1600

Q1/15 Q3/15 Q1/16 Q3/16 Q1/17

Frac stages in North America(source: IHS Markit)

0

100

200

300

400

500

600

700

800

900

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022


Rig countOutlook

Oil price


Targets & Performance: Q2/2017CORPORATE RESPONSIBILITY UPDATE 1/2

Focus area Issue, KPI, target value Comments Status

Sustainable

products &

solutions

INNOVATION SALES

Share of innovation revenue

of total revenue, %

10% by the end of 2017

KPI reported quarterly

During Q2/2017 several new products or

solutions were commercialized and Kemira

expects to achieve the 10% target during

2017.

Responsibility

in our supply

chain

SUPPLIER MANAGEMENT

Number of onsite sustainability

audits for highest risk suppliers(with lowest sustainability assessment

score1)

5 suppliers audited every year

during 2016-2020, average

KPI reported annually

All earlier low-scored suppliers improved their

performance in re-assessments, and no new

high risk raw material suppliers were

detected. However, a few suppliers have

refused to take EcoVadis assessments this

year due to lack of resources or company

policies. Those will be audited in Q3 and Q4

2017.

Responsible

manufacturing

CLIMATE CHANGE

Carbon index

Kemira Carbon

Index ≤ 80 by end

of 2020 (2012 = 100)


Sourcing of low carbon energy continued

according to plan. As part of the E3 Plus

program, four Energy Review site visits were

performed during Q2 2017. The performed

energy reviews cover more than 90% of

Kemira’s total energy consumption.

5%7% 8% 8%

9% 9% 10%

2012 2013 2014 2015 2016 2017Q2

Target2017

4 4

25

2016 2017 Q2 Target 2020

10088 91 92 86 80

2012 2013 2014 2015 2016 Target2020

Behind target In progress Achieved



Focus area Issue, KPI, target value Comments Status

Responsibility

towards the

employees

OCCUPATIONAL HEALTH AND SAFETY

Number of Total Recordable Injury

Frequency (TRIF) (per million hours,

Kemira + contractor, year-to-date1)

Achieve zero injuries

(TRIF 2.0 by end of 2020)

KPI reported quarterly

Behaviour Based Safety (BBS) program pilots

moving ahead as planned, and next 10 sites

implementation starts in Q3 (YTD: 4). To

improve our contractor safety we have

launched Contractor Safety Program which is

looking contractor safety from contracting to

materialization of the contracted work.

EMPLOYEE ENGAGEMENT

Employee engagement index based

on Voices@Kemira biennial survey

The index at or above the external

industry norm

Participation rate in Voices@Kemira

75 % or above

KPI reported biennially

We aim to confirm the next Voices@Kemira

survey by Q4 2017.

LEADERSHIP DEVELOPMENT

Leadership development activities

provided, average

Two (2) leadership development

activities per people manager

position during 2016-20202


High level of activity continued, with 191

leadership development activities provided

during Q2 2017 (target: 75 per quarter).


Targets & Performance: Q2/2017CORPORATE RESPONSIBILITY UPDATE 2/2




70%58% 67%

84% 75%85%

2011 2013 2015

Engagement Participation

8.57.1

5.87.2

3.4 3.8

2012 2013 2014 2015 2016 2017Q2

494685

1500

2016 2017 Q2 Target 2020

1 The TRIF reporting has been changed to a year-to-date figure instead of 12 month rolling average that was previously used. 2 The cumulative amount of leadership development required to reach two (2) leadership development activities per people manager position during 2016-2020 equals 1500 leadership activities (when number of people manager

positions is 650-850). Development activities include job rotations, coaching and mentoring, and development programs.

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Capital Markets Day Kemira progressing our strategy for ... · Capital Markets Day September 21, 2017. Kemira Capital Markets Day 2017 ... Kemira –progressing our strategy for profitable