Kemira Oyj Half-year Financial Report July 20, 2018 at 8.30 am (CET+1)
Kemira Oyj's Half-year Financial Report 2018: Revenue growth continued led by Industry & Water
This is a summary of the January - June 2018 Half-year Financial Report. The complete January - June 2018 Financial Report with tables is attached to this release and available at www.kemira.com/investors .
Second quarter:
- Revenue increased by 5% to EUR 647.6 million (617.2) driven by higher sales prices, especially in Industry & Water, despite the negative currency impact. Revenue in local currencies, excluding acquisitions and divestments, increased by 9%.
- Operative EBITDA increased by 4% to EUR 80.2 million (77.1) mainly due to higher sales prices which offset increases in variable costs. Negative currency impact was approximately EUR 9 million. Operative EBITDA margin was 12.4% (12.5%). EBITDA increased by 23% to EUR 82.5 million (67.0) explained by items affecting comparability.
- EPS increased to EUR 0.14 (0.12) mainly due to higher operative EBITDA and gain on sale.
January-June
- Revenue increased by 3% to EUR 1,261.4 million (1,227.3) as sales price increases and volume growth, especially in the North American oil and gas business, more than offset the negative currency impact. Revenue in local currencies, excluding acquisitions and divestments, increased by 8%.
- Operative EBITDA increased by 2% to EUR 149.6 million (146.1) as higher sales prices more than offset the increase in variable costs. The negative currency impact was approximately EUR 16 million. Operative EBITDA margin was 11.9% (11.9%). EBITDA increased by 13% to EUR 150.7 million (133.7)
- EPS increased to EUR 0.28 (0.24) mainly due to higher operative EBITDA and items affecting comparability.
Update on joint venture / acquisition of AKD wax producer in China Kemira agreed in the third quarter of 2017 to form a joint venture (NewCo) with Tiancheng. Kemira will have 80% and Tiancheng 20% of NewCo. NewCo will mainly produce AKD wax and its key raw material fatty acid chloride. The deal is subject to certain closing conditions and is still pending certain authority approvals.
Kemira's President and CEO Jari Rosendal: "Strong organic growth continued in the second quarter. Sales price increases have started to come through and they are much needed to compensate for the increasing variable costs. In comparison to last year, profitability continued to be negatively impacted by currency movements, primarily from the EUR/USD exchange rate.
In Pulp & Paper, organic growth continued at a good level and was 6% in the second quarter. In general, global megatrends are favorable to the pulp and paper industry, including chemical providers. For example, the search for alternative materials to single-use plastic products is creating opportunities for Kemira. There is an increasing need for biobased and biodegradable materials and Kemira is well positioned in the value chain, supporting board producers to create sustainable packaging materials.
Industry & Water achieved organic growth of 14% in Q2, driven by strong demand in the oil and gas business. Profitability increased substantially with the help of higher sales prices. Market trends are positive both in oil and gas as well as in water treatment. Drinking water producers are often faced with deteriorating quality of raw water, as well as tightening regulations for safe and clean potable water. By bringing Kemira's decades of experience and expertise in R&D and technology to the water market, Kemira can support operators to meet requirements for safe drinking water.
We continue to drive for higher profitability and implement measures to support that. In 2018, Kemira expects its operative EBITDA to increase from the prior year."
KEY FIGURES AND RATIOS
| EUR million | Apr-Jun 2018 | Apr-Jun 2017 | Jan-Jun 2018 | Jan-Jun 2017 | Jan-Dec 2017 |
| Revenue | 647.6 | 617.2 | 1,261.4 | 1,227.3 | 2,486.0 |
| Operative EBITDA | 80.2 | 77.1 | 149.6 | 146.1 | 311.3 |
| Operative EBITDA, % | 12.4 | 12.5 | 11.9 | 11.9 | 12.5 |
| EBITDA | 82.5 | 67.0 | 150.7 | 133.7 | 282.4 |
| EBITDA, % | 12.7 | 10.9 | 11.9 | 10.9 | 11.4 |
| Operative EBIT | 45.1 | 43.6 | 79.0 | 78.6 | 170.3 |
| Operative EBIT, % | 7.0 | 7.1 | 6.3 | 6.4 | 6.9 |
| EBIT | 38.5 | 33.5 | 71.2 | 66.2 | 141.4 |
| EBIT, % | 5.9 | 5.4 | 5.6 | 5.4 | 5.7 |
| Finance costs, net | -7.4 | -7.7 | -11.3 | -14.4 | -28.9 |
| Profit before taxes | 31.1 | 25.9 | 59.9 | 51.9 | 112.6 |
| Net profit for the period | 23.5 | 19.6 | 46.6 | 39.4 | 85.2 |
| Earnings per share, EUR | 0.14 | 0.12 | 0.28 | 0.24 | 0.52 |
| Capital employed* | 1,754.6 | 1,749.7 | 1,754.6 | 1,749.7 | 1,763.2 |
| Operative ROCE*, % | 9.7 | 9.2 | 9.7 | 9.2 | 9.7 |
| ROCE*, % | 8.3 | 8.0 | 8.3 | 8.0 | 8.0 |
| Cash flow from operating activities | 23.4 | 28.6 | 57.9 | 40.8 | 205.1 |
| Capital expenditure excl. acquisition | 39.8 | 45.2 | 63.0 | 82.1 | 190.1 |
| Capital expenditure | 37.4 | 45.2 | 59.8 | 82.1 | 190.1 |
| Cash flow after investing activities | -12.9 | -16.5 | 3.5 | -41.1 | 13.0 |
| Equity ratio, % at period-end | 43 | 43 | 43 | 43 | 44 |
| Equity per share, EUR | 7.42 | 7.18 | 7.42 | 7.18 | 7.61 |
| Gearing, % at period-end | 67 | 69 | 67 | 69 | 59 |
| Personnel at period-end | 4,858 | 4,849 | 4,858 | 4,849 | 4,732 |
*12-month rolling average (ROCE, % based on the EBIT)
Kemira provides certain financial performance measures (alternative performance measures) on a non-GAAP basis. Kemira believes that alternative performance measures, such as organic growth*, EBITDA, operative EBITDA, cash flow after investing activities, and gearing, followed by capital markets and Kemira management, provide useful information of its comparable business performance and financial position. Selected alternative performance measures are also used as performance criteria in remuneration.
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.
All the figures in this interim report have been individually rounded, and consequently the sum of individual figures may deviate slightly from the sum figure presented.
* Revenue growth in local currencies, excluding acquisitions and divestments
OUTLOOK FOR 2018 (UNCHANGED) Kemira expects its operative EBITDA to increase from the prior year (2017: EUR 311.3 million).
MID- AND LONG-TERM FINANCIAL TARGETS (UNCHANGED)
Kemira aims at above-the-market revenue growth with operative EBITDA margin of 14-16%. The gearing target is below 60%.
Helsinki, July 19, 2018
Kemira Oyj Board of Directors REPORTING CALENDAR 2018 AND 2019
Interim Report January-September 2018 October 24, 2018 Financial Statements Bulletin 2018 February 8, 2019 Interim Report January-March 2019 April 26, 2019 Half-Year Financial Report January-June 2019 July 19, 2019 Interim Report January-September 2019 October 24, 2019
Annual General Meeting will be held in Marina Congress Center on March 21, 2019.
PRESS AND ANALYST CONFERENCE AND CONFERENCE CALL
Kemira will arrange a press conference for the analysts, investors, and media on Friday, July 20, 2018, starting at 1.00 pm (11.00 am 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 above-mentioned 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 81710495 UK: +44 20 31940552 SE: +46 8 56642702 US: +1 855 7161597 PIN Code: 97294154# For more information, please contact: Kemira Oyj Olli Turunen, Vice President, Investor Relations Tel. +358 40 552 8907
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 and water treatment. In 2017, Kemira had annual revenue of around EUR 2.5 billion and 4,732 employees. Kemira shares are listed on the Nasdaq Helsinki Ltd. www.kemira.com
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