Kemira Oyj Stock Exchange Release October 25, 2016 at 8.30 am (CET+1) Kemira Oyj's Interim Report January-September 2016: Profitability improvement continued, operative EBITDA outlook confirmed, revenue outlook reduced This is a summary of the January - September 2016 Interim report. The complete January - September 2016 Interim report with tables is attached to this release and available at www.kemira.com/investors.
Third quarter:
- Revenue decreased 5% to EUR 596.3 million (625.1) due to lower sales prices and continued challenging market impacting Oil & Mining compared to prior year. Revenue in local currencies, excluding acquisitions and divestments, decreased 4%.
- Operative EBITDA increased 3% to EUR 80.8 million (78.2) driven by improved gross margin and lower fixed costs. Operative EBITDA margin improved to 13.6% (12.5%).
- Earnings per share were EUR 0.16 (0.17).
January-September:
- Revenue remained at approximately prior year level and was EUR 1,766.8 million (1,772.9) as decline in sales prices and challenging market in Oil & Mining offset the growth from acquisitions and increased sales volumes. Revenue in local currencies, excluding acquisitions and divestments, decreased 2% as volume growth was not able to offset declining sales prices.
- Operative EBITDA increased 6% to EUR 232.5 million (219.3) as a result of improved gross margin and sales volume growth. Operative EBITDA margin improved to 13.2% (12.4%).
- Earnings per share increased 9% to EUR 0.49 (0.45).
- Outlook (changed): Kemira expects its revenue to be at approximately prior year level (previously: "to increase") and operative EBITDA to increase in 2016 compared to 2015
Kemira's President and CEO Jari Rosendal: "We continued to improve our operative EBITDA in Q3 while organic revenue growth in today's market situation is a challenge. Group's operative EBITDA margin improved to 13.6%, partly helped by normal seasonality. Our organic growth was negative due to lower sales prices and decline in Oil & Mining market. We also experience a currency exchange headwinds. As a sum of these elements, we now expect the full-year revenue to be at approximately prior year level. There is no change to the profitability outlook, operative EBITDA is expected to increase in 2016. Pulp & Paper continued its strong improvement in profitability. Operative EBITDA margin improved to 14.2% from 12.3%. Revenue development was below expectations due to lower sales prices leading to a 4% decline in revenue in local currencies, excluding acquisitions and divestments. In Oil & Mining, the market situation in shale oil & gas has improved somewhat as the segment's volume growth was 11% compared to the second quarter of 2016 while prices remain under pressure. However, the profitability improvement comes with a lag as the market remains competitive and estimated growth in Chemical Enhanced Oil Recovery has a dilutive impact on the margin during the ramp-up phase. Municipal & Industrial also was impacted by lower sales prices but operative EBITDA margin reached again more than 16%. This is an excellent level, partly supported by normal seasonality. I am satisfied with the continued profitability improvement. We have again taken another step towards reaching our mid- to long-term target of 14-16% for operative EBITDA." KEY FIGURES AND RATIOS
| EUR million | Jul-Sep 2016 | Jul-Sep 2015 | Jan-Sep 2016 | Jan-Sep 2015 | Jan-Dec 2015 |
| Revenue | 596.3 | 625.1 | 1,766.8 | 1,772.9 | 2,373.1 |
| Operative EBITDA | 80.8 | 78.2 | 232.5 | 219.3 | 287.3 |
| Operative EBITDA, % | 13.6 | 12.5 | 13.2 | 12.4 | 12.1 |
| EBITDA | 78.3 | 74.8 | 218.7 | 206.1 | 263.8 |
| EBITDA, % | 13.1 | 12.0 | 12.4 | 11.6 | 11.1 |
| Operative EBIT | 46.5 | 46.1 | 134.0 | 130.0 | 163.1 |
| Operative EBIT, % | 7.8 | 7.4 | 7.6 | 7.3 | 6.9 |
| EBIT | 43.7 | 42.7 | 117.8 | 114.8 | 132.6 |
| EBIT, % | 7.3 | 6.8 | 6.7 | 6.5 | 5.6 |
| Finance costs, net | -6.9 | -8.2 | -13.2 | -25.0 | -30.8 |
| Profit before taxes | 36.8 | 34.5 | 104.7 | 90.1 | 102.1 |
| Net profit for the period | 27.3 | 27.1 | 79.7 | 72.8 | 77.2 |
| Earnings per share, EUR | 0.16 | 0.17 | 0.49 | 0.45 | 0.47 |
| Capital employed* | 1,711.5 | 1,601.6 | 1,711.5 | 1,601.6 | 1,659.5 |
| Operative ROCE* | 9.8 | 10.6 | 9.8 | 10.6 | 9.8 |
| ROCE*, % | 7.9 | 10.0 | 7.9 | 10.0 | 8.0 |
| Cash flow from operating activities | 85.0 | 80.9 | 168.2 | 135.0 | 247.6 |
| Capital expenditure excl. acquisition | 48.5 | 49.1 | 123.2 | 120.4 | 181.7 |
| Capital expenditure | 48.5 | 55.5 | 121.3 | 241.8 | 305.1 |
| Cash flow after investing activities | 36.9 | 27.6 | 84.4 | -103.6 | -53.8 |
| Equity ratio, % at period-end | 45 | 46 | 45 | 46 | 46 |
| Equity per share, EUR | 7.48 | 7.55 | 7.48 | 7.55 | 7.76 |
| Gearing, % at period-end | 58 | 59 | 58 | 59 | 54 |
| Personnel at period-end | 4,843 | 4,692 | 4,843 | 4,692 | 4,685 |
*12-month rolling average (ROCE, % based on the EBIT)
Kemira provides certain financial performance measures (alternative performance measures) on non-GAAP basis. Kemira believes that alternative performance measures, like operative EBITDA and operative EBIT, followed by Kemira management, provide useful and more comparable information of its operative business performance. 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. MID- AND LONG-TERM FINANCIAL TARGETS (UPDATED ON SEPTEMBER 14, 2016) AND OUTLOOK FOR 2016 (CHANGED) Kemira updated its mid- to long-term financial targets prior to the company's Capital Markets Day, emphasizing its continued goal of above-the-market revenue growth with improving profitability. The company has progressed well towards the previous targets of EUR 2.7 billion in revenue and operative EBITDA margin of 15%, despite the weak developments in oil & gas markets, which started in 2015. Kemira aims at above-the-market revenue growth with operative EBITDA margin of 14-16%. The gearing target is maintained at below 60%. Main drivers for Kemira's profitable growth are:
- In Pulp & Paper: above-the-market growth arising from new Total Chemistry Management (TCM) contracts and bleaching chemical capacity additions, as well as synergy capture from acquisitions
- In Oil & Mining: profitable growth in newer applications such as Chemical Enhanced Oil Recovery (CEOR) and Oil Sands, as well as potential oil market recovery
- In Municipal & Industrial: increasing revenue from Advanced Water Treatment (AWT) applications, as well as continuing growth in current business driven by selective geographic expansion
- Group-wide operational efficiencies with new BOOST program.
Kemira has launched an operational excellence program 'BOOST' to improve efficiency. Estimated annual savings run-rate from the program are EUR 20-30 million in 2-3 years. BOOST will focus on supply chain process optimization and improved asset utilization. The integration of the acquired AkzoNobel paper chemicals business has progressed better than expected and Kemira has raised the synergy target from EUR 15 million to EUR 20 million. In addition, Kemira continues to evaluate acquisition opportunities to enhance profitable growth. Outlook for 2016 (changed) Kemira continues to focus on profitable growth. Kemira expects its revenue to be at approximately prior year level (previously: "to increase") and operative EBITDA to increase in 2016 compared to 2015. Kemira expects its capital expenditure, excluding acquisitions, to be around EUR 200 million in 2016. Helsinki, October 24, 2016 Kemira Oyj Board of Directors FINANCIAL CALENDAR 2016 AND 2017 Financial Statements Bulletin 2016 February 8, 2017 Interim report January-March 2017 April 26, 2017 Interim report January-June 2017 July 21, 2017 Interim report January-September 2017 October 25, 2017 The Annual General meeting will be held on March 24, 2017 at 10.00 Marina Congress Center, Helsinki. PRESS AND ANALYST CONFERENCE AND CONFERENCE CALL Kemira will arrange a press conference for analysts, investors and media starting at 10.30 am (8.30 am UK time) at GLO Hotel Kluuvi, Kluuvikatu 4, 2nd floor, Helsinki . In the conference, Kemira's President and CEO Jari Rosendal and CFO Petri Castrén will present the results. The press conference will be held in English and will be webcasted at www.kemira.com/investors . The presentation material and the webcast recording will be available on the above mentioned company website. You can attend the Q&A session via a conference call. In order to participate in the call, please dial ten minutes before the conference begins: FI: +358 9 7479 0361 SE: +46 8 5033 6574 UK: +44 203 043 2002 US: +1 719 4572086 Conference id: 7817960 For more information, please contact Kemira Oyj Olli Turunen, Vice President, Investor Relations Tel. +358 10 862 1255
Kemira is a global chemicals company serving customers in water-intensive industries. We provide expertise, application know-how 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 2015, Kemira had annual revenue of EUR 2.4 billion and around 4,700 employees. Kemira shares are listed on the Nasdaq Helsinki Ltd. www.kemira.com
