Kemira Oyj Financial Statements Release February 8, 2017 at 8.30 am (CET+1)
Kemira Oyj's Financial Statements Bulletin 2016: Profitability improvement continued in 2016 This is a summary of the Financial Statements Bulletin of 2016. The complete Financial Statements Bulletin 2016 with tables is attached to this release and available at www.kemira.com/investors .
Fourth quarter
- Revenue remained at approximately the prior year level and was EUR 596.5 million (600.2) as the growth in Oil & Mining was offset by decline in sales prices in Pulp & Paper and Municipal & Industrial. Revenue in local currencies, excluding acquisitions and divestments, decreased 1%.
- Operative EBITDA increased 3% to EUR 70.0 million (68.0) driven by sales volume growth and lower fixed costs. Operative EBITDA margin improved to 11.7% (11.3%).
- Earnings per share increased to EUR 0.11 (0.02) due to higher profitability and lower taxes.
Full year
- Revenue remained at approximately the prior year level and was EUR 2,363.3 million (2,373.1) as growth from acquisitions and increased sales volumes was offset by decline in sales prices and challenging market impacting Oil & Mining segment. Revenue in local currencies, excluding acquisitions and divestments, decreased 2% as volume growth was not able to offset declining sales prices.
- Operative EBITDA increased 5% to EUR 302.5 million (287.3), mainly due to sales volume growth while lower sales prices were offset by lower variable costs. Operative EBITDA margin improved to 12.8% (12.1%).
- Earnings per share increased 28% to EUR 0.60 (0.47) due to improved profitability and gain on the sale of electricity assets.
Dividend proposal for 2016
The Board of Directors proposes a cash dividend of EUR 0.53 per share (0.53) to the Annual General Meeting 2017, totaling EUR 81 million (81).
Outlook for 2017
Kemira expects its operative EBITDA to increase from the prior year (2016: EUR 302.5 million).
Kemira's President and CEO Jari Rosendal: "The fourth quarter was our 10 th consecutive quarter of year-on-year operative EBITDA improvement. Municipal & Industrial demonstrated good performance in operative EBITDA while Pulp & Paper was affected by higher than normal impact of maintenance breaks. Oil & Mining had the first quarter of revenue growth since Q1 2015 as the demand from shale oil and gas operators has recovered from the bottom.
In 2016, our revenue remained at the prior year level with improving operative EBITDA by EUR 15 million despite challenging oil and gas markets. The profitability improvement from 12.1% to 12.8% is a good achievement in the current market environment. In addition, our cash flow from operations improved and cash flow after investing activities more than covers the dividend proposal. I am pleased with our development, especially when considering the volatile market conditions.
In Pulp & Paper, we had sales volume growth in 2016 while sales prices declined. Sales prices have declined as a result of the lower raw material prices and competitive market environment. Despite the negative organic growth, the segment improved its operative EBITDA margin to 13.4% from 12.1% driven by acquisition synergies, higher utilization rates, and new capacity. During the year, we started up a new bleaching chemical site in Brazil and initiated an EUR 50-60 million investment in the new sodium chlorate line in Finland, which is expected to be in production in the fourth quarter of 2017.
In Oil & Mining, adverse market development led to lower revenue and declined profitability for the year. We have seen signs of recovery in the shale market after the summer of 2016. We continued investments into new long-term growth areas, such as oil sands and Chemical Enhanced Oil Recovery. These created new revenue streams for us during the year even as the market uptake in CEOR has been slower than expected and the market is very competitive.
In Municipal & Industrial, sales volume growth and profitability improvement continued. The operative EBITDA margin reached 14.9% compared to 13.7% in 2015. The improvement is mainly driven by better operational performance, customer focus, and lower raw material prices. The closures of sites in Canada and Spain enabled to improve our utilization of capacity and efficiency.
Looking back to our development since 2014, we have increased our revenue by EUR 230 million and operative EBITDA by EUR 50 million. This is a good achievement, taking into account adverse oil and gas markets. We continue to drive for profitable growth towards our mid- to long-term targets of above-the-market revenue growth and operative EBITDA margin of 14-16%. We look into 2017 with cautious optimism, despite macroeconomic and political uncertainties. Kemira expects its operative EBITDA to increase from the prior year."
KEY FIGURES AND RATIOS
| EUR million | Oct-Dec 2016 | Oct-Dec 2015 | Jan-Dec 2016 | Jan-Dec 2015 |
| Revenue | 596.5 | 600.2 | 2,363.3 | 2,373.1 |
| Operative EBITDA | 70.0 | 68.0 | 302.5 | 287.3 |
| Operative EBITDA, % | 11.7 | 11.3 | 12.8 | 12.1 |
| EBITDA | 65.5 | 57.7 | 284.2 | 263.8 |
| EBITDA, % | 11.0 | 9.6 | 12.0 | 11.1 |
| Operative EBIT | 36.1 | 33.1 | 170.1 | 163.1 |
| Operative EBIT, % | 6.1 | 5.5 | 7.2 | 6.9 |
| EBIT | 29.2 | 17.8 | 147.0 | 132.6 |
| EBIT, % | 4.9 | 3.0 | 6.2 | 5.6 |
| Finance costs, net | -5.9 | -5.8 | -19.1 | -30.8 |
| Profit before taxes | 23.3 | 12.0 | 128.0 | 102.1 |
| Net profit for the period | 18.2 | 4.4 | 97.9 | 77.2 |
| Earnings per share, EUR | 0.11 | 0.02 | 0.60 | 0.47 |
| Capital employed* | 1,718.2 | 1,659.5 | 1,718.2 | 1,659.5 |
| Operative ROCE* | 9.9 | 9.8 | 9.9 | 9.8 |
| ROCE*, % | 8.6 | 8.0 | 8.6 | 8.0 |
| Cash flow from operating activities | 102.4 | 112.6 | 270.6 | 247.6 |
| Capital expenditure excl. acquisitions | 89.4 | 61.2 | 212.6 | 181.7 |
| Capital expenditure | 89.3 | 63.2 | 210.6 | 305.1 |
| Cash flow after investing activities | 13.4 | 49.8 | 97.8 | -53.8 |
| Equity ratio, % at period-end | 45 | 46 | 45 | 46 |
| Equity per share, EUR | 7.68 | 7.76 | 7.68 | 7.76 |
| Gearing, % at period-end | 54 | 54 | 54 | 54 |
| Personnel at period-end | 4,818 | 4,685 | 4,818 | 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.
DIVIDEND AND DIVIDEND POLICY On December 31, 2016, Kemira Oyj's distributable funds totaled EUR 822,049,454 of which net profit for the period was EUR 215,781,981. No material changes have taken place in the company's financial position after the balance sheet date.
Kemira Oyj's Board of Directors proposes to the Annual General Meeting to be held on March 24, 2017 that a dividend of EUR 0.53 per share totaling EUR 81 million shall be paid on the basis of the adopted balance sheet for the financial year ended December 31, 2016. Kemira's dividend policy aims to pay a stable and competitive dividend. MID- AND LONG-TERM FINANCIAL TARGETS (UNCHANGED) AND OUTLOOK FOR 2017 Kemira updated its mid- to long-term financial targets on September 14, 2016, 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 below 60%.
Main drivers for Kemira's profitable growth are:
- In Pulp & Paper: above-the-market growth arising from the 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 further improve its efficiency. Estimated annual savings run-rate from the program are EUR 20-30 million in 2-3 years. BOOST will focus on the supply chain process optimization and improved asset utilization.
The integration of the acquired AkzoNobel's 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 2017 Kemira expects its operative EBITDA to increase from the prior year (2016: EUR 302.5 million).
Helsinki, February 7, 2017
Kemira Oyj Board of Directors FINANCIAL CALENDAR 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 a.m. at the Marina Congress Center, Helsinki.
Capital Markets Day will be held in London on September 21, 2017.
Press and analyst conference and conference call
Kemira will arrange a press conference for the analysts, investors, and media on February 8, 2017 starting at 10.30 a.m. (8.30 a.m. UK time) at GLO Hotel Kluuvi, Kluuvikatu 4, 2nd Floor, Helsinki. During 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 abovementioned company website. You can attend the Q&A session via a conference call. In order to participate in the conference, please call ten minutes before the conference begins:
FI: +358 9 7479 0361 SE: +46 8 5033 6574 UK: +44 330 336 9105 US: +1719 325 4746
Conference id: 2285978 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' product quality, process and resource efficiency. Our focus is on pulp & paper, oil & gas, mining and water treatment. In 2016, Kemira had annual revenue of around EUR 2.4 billion and 4,800 employees. Kemira shares are listed on the Nasdaq Helsinki Ltd. www.kemira.com
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