Capital Markets Day 2020
November 19, 2020 Capital Markets Day 2020
AGENDA (EET):
14:00 Opening remarks, Mikko Pohjala, Head of Investor Relations Jari Rosendal Petri Castrén President and CEO CFO PRESENTATIONS: 14:00 Jari Rosendal, President and CEO + Q&A* 14:25 Antti Salminen, Industry & Water + Q&A* 14:50 Harri Eronen, Pulp & Paper + Q&A* 15:15 Video interview with Matthew Pixton, CTO 15:25 Petri Castrén, CFO Antti Salminen Harri Eronen 15:45 Q&A via audio line President, Industry SVP, Pulp & Paper, & Water EMEA ~16:00 Summary and wrap-up by CEO ~16:05 CMD concludes
*questions via webcast platform
Matthew Pixton CTO (video interview on NOVEMBER 19, 2020 CAPITAL MARKETS DAY biobased chemistry) 2 Capital Markets Day 2020
Q&A VIA WEBCAST PLATFORM Questions can be submitted through the form in the webcast window during the presentations. Questions are only visible to the moderator.
Q&A VIA TELEPHONE CONFERENCE AT THE END Telephone lines open at approximately 15.45 EET Finland Toll: +358 981710310 Sweden Toll: +46 856642651 United Kingdom Toll: +44 3333000804 United States Toll: +1 6319131422 PIN: 79046717#
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 3 Disclaimer
This presentation includes, or may be deemed to include, forward-looking statements. These statements relate to expected future events or expected future financial performance, including, but not limited to, strategic plans, potential growth, planned operational changes, expected capital expenditure and future cash sources and requirements. These events involve known and unknown risks, uncertainties and other factors that may cause Kemira Oyj’s or its businesses’ actual results of operations, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. In some cases, such forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “aim,” “target,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of those terms or other comparable terminology. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Future results may vary from the results expressed in, or implied by, the forward-looking statements contained in this presentation, possibly to a material degree. All forward-looking statements made in this presentation are based on information presently available to management and Kemira Oyj assumes no obligation to update any forward-looking statements, unless obligated to do so under applicable law or regulation. Viewers should understand that this presentation does not constitute an offer to buy or subscribe Kemira Oyj’s securities. Potential investors are instructed to familiarize themselves with Kemira Oyj’s financial reports available on the company’s website in order to form a comprehensive picture of Kemira Oyj and its securities. Kemira Oyj publishes inside information according to the Market Abuse Regulation (MAR, 596/2014/EU) and the Nordic Main Market Rulebook for Issuers of Shares and the other rules of Nasdaq Helsinki.
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 4 CAPITAL MARKETS DAY 2020
Fundamentally stronger Kemira
JARI ROSENDAL, PRESIDENT AND CEO NOVEMBER 19, 2020 We have delivered since our last CMD in 2017
REVENUE OPERATIVE TRIF** NET PROMOTER EBITDA SCORE
EUR EUR % million million 2,659 3.9 47 2,593 450 20.0 2,486 18.0% 410 3.5 400 17.5 15.4% 350 36 323 327 15.0 1,822 311 33 300 30 12.5 2.3 250 12.5% 12.5% 2.1 10.0 200 7.5 150
5.0 100
50 2.5
0 0.0 2017 2018 2019 1-9 2017 2018 2019* 1-9 2017 2018 2019 1-9 2017 2018 2019 2020*** 2020 2020* 2020 * includes IFRS16 impact **TRIF = total recordable injury frequency per million hours, Kemira + contractors NOVEMBER 19, 2020 CAPITAL MARKETS DAY ***Average NPS score in 2020, data in 2020 limited due to a 6-month break in interviews following COVID-19 6 Strengthening the foundation and improving profitability
Organic growth / expansion of site Acquisition Operational efficiencies Closure of site / divestment
Start-up of Ortigueira Chevron CEOR deal & Ramp-up of of new AKD Start-up of new AKD wax site sodium chlorate site (BR) Botlek expansion wax site (CN) (CN)
Bradford polymer Start-up of Joutseno chlorate Polymer investment decision, Ramp-up of of Botlek expansion (UK) expansion (FI) Mobile (US) polymer facility (NL) Eastover Bleaching San Giorgio polymer Major oil sands tailings water AKD wax manufacturing Joint Venture – Dry polymers extension start-up (US) expansion (IT) treatment deal (CA) JV deal closed (CN) (SK) 2020 Operative 2019 Operative EBITDA 2018 EBITDA 1-9 2015: 12.1% 2017 Move from ‘Value over volume’ 2020: 18.0% 2016 to ‘Active price management’ ‘Value over volume’ initiated Chlorate and peroxide Two segment expansion in Fray Bentos (UY) Transportation agreement with structure operational Odyssey go-live in Europe Cost savings in Pulp & Paper Odyssey Goole coagulant expansion (UK) Closing of ECOX detergent Odyssey go-live production (SWE) Botlek modernization (NL) in North America Divestment of coagulant Raw material flexibility: asset (IT) - Coagulants to Magnetite BOOST operational - Bradford AN purification excellence program launch Divestment of Kemira Operon Closures of Ottawa (CA) and (water treatment facility Zaramillo (ES), coagulants operations, FI)
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 7 1-9 2020: Solid performance in a challenging environment
STRONG PROFITABILITY DESPITE LOWER SALES VOLUMES
REVENUE OPERATIVE EBITDA & CASH FLOW FROM NET PROMOTER SCORE MARGIN OPERATING ACTIVITIES
EUR EUR EUR million million million -9% +2% -6% 47 2,001 319.9 327.2 243.7 1,822 228.3 18% 32 16%
1-9 2019 1-9 2020 1-9 2019 1-9 2020 1-9 2019 1-9 2020 Chemical Kemira* sector average *Average NPS score in 2020, data in 2020 limited due to a 6-month break in interviews following COVID-19
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 8 We have a strong commitment to sustainability
FIVE THEMES AS SUSTAINABILITY FOCUS AREAS SAFETY Safe production and use of our products throughout their lifecycle, strong safety culture Chemical PEOPLE sector Strong company culture, diversity and commitment average Chemical to people sector average WATER We help ensure safe clean water for people and nature Solutions to provide safe clean water with water-related risks managed effectively CIRCULARITY We are making the circular bioeconomy a reality Chemical Improve customer resource efficiency; increase biobased sector and recycled raw material use average CLIMATE Kemira will help build a carbon neutral society Chemical Ambition to be carbon neutral by 2045, and -30% CO2 Chemical sector emissions by 2030 (Scope 1 and Scope 2 emissions) sector average average
*) includes people, operations (environment) and chemical safety
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 9 Looking to the future
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 10 After several years of focusing on improving the business fundamentals, we are now increasing focus on growth
Portfolio Organic growth Continuous operational restructuring & investments and improvements with Fit for Growth focus on improving increased focus on growth fundamentals: Focus on improving relative profitability & cash flow 2014 2020 2025 2035
UNDERLYING Profitability Profitability Sustaining 15-18 % profitability with FACTORS: below target reaching target increased focus on growth
• Water treatment applications GROWTH Pulp & Paper Industry & Water, • Sustainability: capitalizing on biobased and DRIVERS: particularly Oil & Gas recyclable materials growth trend
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 11 Global megatrends largely favor Kemira – sustainability becoming a key driver for the long term
CHANGING GROWING DEMOGRAPHICS ENVIRONMENTAL AWARENESS
Growing Changing More efficient use Focus on biobased Tightening Climate change middle-class lifestyles with of scarce natural and recyclable environmental mitigation and urbanization growth in e- resources materials for our regulation commerce customers
Higher use of Higher use of Chemicals to support Alternatives to fossil fuel Increased need for water Increased need for water water and tissue packaging and board circular economy needs based solutions treatment treatment
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 12 SUSTAINABILITY WILL BE A KEY DRIVER FOR FUTURE GROWTH
TO SUPPORT OUR CUSTOMERS IN Customer behavior THE SHIFT TOWARDS HIGHER SUSTAINABILITY, is changing with an WE WILL: Address growing recyclability and increased focus on biodegradability demand for products sustainability Gradually transform our product portfolio to more biobased Pulp & Paper Reduce the use of fossil-fuel based carbon Customers desire for biodegradable and recyclable products - growing need for biobased chemicals as raw material Customer product portfolio will evolve when going TO INCREASE THE SUSTAINABILITY further into the bioeconomy – totally new uses for fiber OF OUR OPERATIONS, WE WILL: Industry & Water Increase the share of recycled Overall sustainability focus driven by consumers material in our products Growing market for circular products with high share of recycled content
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 13 WE WANT TO ENSURE PROFITABLE GROWTH BY BECOMING THE LEADING PROVIDER OF SUSTAINABLE CHEMICAL SOLUTIONS FOR WATER - I N T E N S I V E INDUSTRIES
CURRENT REVENUE TARGET REVENUE IN 2030 ~100 MEUR >500 MEUR FROM BIOBASED FROM BIOBASED PRODUCTS PRODUCTS
CURRENT SHARE TARGET SHARE IN 2030 12% 40% OF RENEWABLE CARBON OF OF RENEWABLE CARBON OF ALL CARBON CONTAINING ALL CARBON CONTAINING RAW MATERIALS RAW MATERIALS
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 14 What will the sustainability focus mean for our businesses?
Pulp & Paper Industry & Water
• Increase focus on circularity as customers • Increase focus and investments on water are demanding recyclability and treatment biodegradability • In Oil & Gas, direct focus to growing and less • Focus investments in sustainable pulp, volatile CEOR and oil sands tailings packaging and tissue applications. Limit businesses investments in declining printing & writing applications. • Explore new markets for water treatment, particularly in APAC • Explore new competencies, e.g. barrier solutions to capture market growth • Explore new competencies and product lines opportunities within water treatment
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 15 Maintaining a close eye on profitability, while investing in sustainable growth
PROFITABILITY GROWTH Continuous focus On-going investments • Disciplined price and cost management • Polymers: Mobile, U.S.A, South Korea • Capitalizing on completed investments in China, • Coagulants: Goole, UK Netherlands and the U.S. • Bleaching: Uruguay • Complexity reduction Future investments Profitability improvement actions • Continue to focus on top four product groups • Further profitability improvement in Process (bleaching, polymers, coagulants, sizing), and Functional chemicals particularly on water treatment side • Further improvement in profitability in Asia- • Selective acquisitions to enter new regions or Pacific: growth and new investments playing to add new competencies a key role • Capital expenditure to be increasingly • Oil & Gas: organizational restructuring allocated towards biobased opportunities completed; organization ready for growth when demand picks up
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 16 We will focus on profitable growth driven by sustainability
1. 2. 3.
Look for above-the-market growth Aim to become the leading provider Financial target for operative both organically and inorganically, of sustainable chemical solutions EBITDA updated to 15-18%. particularly in water treatment. for water-intensive industries.
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 17
CAPITAL MARKETS DAY 2020
Industry & Water: Increasing focus on water treatment
ANTTI SALMINEN PRESIDENT, INDUSTRY & WATER We have strengthened our business and improved profitability since 2017
OPERATIVE EBITDA AND OPERATIVE EBITDA MARGIN DEVELOPMENT 1. BUSINESS FUNDAMENTALS: EUR • Two segments merged into one in 2017 million % • Streamlining of business and product portfolio, including 200 192 18.5% 20 optimization of organization and manufacturing network 16.9% • Diversification of Oil & Gas business to include CEOR and oil sands tailings 16 150 131 136 2. PROFITABILITY FOCUS: 114 12 12.3% • From value over volume to active price management 100 11.3% • Significant profitability improvement, particularly in North 8 American water treatment
50 4 3. ENGAGEMENT SCORES: • Customer satisfaction (NPS): clearly above chemical sector average at 53 in 2020*; positive feedback on Kemira’s 0 0 handling of COVID-19 2017 2018 2019* 1-9 2020* • Safety scores: 85/100 * Includes IFRS16 impact • Employee engagement scores: 75/100
*average NPS in 2020, data in 2020 limited due to a 6-month break in interviews following COVID-19
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 20 We have significantly improved profitability in North American water treatment
Key actions since 2017 to improve profitability • Organization restructuring in 2018 • Disciplined price and cost management • Focus on customer profitability
NORTH AMERICA WATER TREATMENT REVENUE AND MARGIN DEVELOPMENT
2015 2016 2017 2018 2019* 1-9 2020* EBITDA-% Revenue
* Includes IFRS16 impact
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 21 Our polymer investment in the Netherlands serves growing CEOR market • Capacity addition announced in October 2017, facility fully operational with positive EBITDA contribution as of Q1 2020 • Manufacturing facility serves offshore CEOR • Investment includes capacity addition as well as improves backward integration • Multi-year extension to current contract with Ithaca Energy announced in September 2020. The extension will ensure good utilization of the facility going forward.
Investment around EUR 30 million, EBITDA contribution high single-digit millions (annualized)
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 22 Profitability has remained strong in 2020 despite volatility in shale
WATER TREATMENT 1-9 2020 OIL & GAS 1-9 2020 Revenue: Municipal water treatment (2/3 of water treatment Revenue: Significantly down due to shale and oil revenue) revenue grew slightly, industrial water treatment sands tailings, slight growth in CEOR revenue revenue (1/3 of water treatment revenue) declined high single-digits Profitability: Clearly impacted by revenue decline, restructuring measures taken to compensate some of Profitability: Sales prices remained solid with clear support the headwinds from variable and fixed cost tailwind
WATER TREATMENT REVENUE AND ORGANIC OIL & GAS REVENUE AND ORGANIC GROWTH 2017- 1-9 2020 GROWTH 2017- 1-9 2020 EUR million EUR million 87 216 211 213 220 212 200 203 202 207 199 205 205 206 199 203 73 77 66 62 66 57 57 56 52 45 46 38 41 +2% +2% +4% +12% +6% +9% +5% -1% 0% -2% +3% -1% +3% -6% -5% 27 +30% +54% +46% +33% +34% +41% +63% +37% +26% +30% +15% -2% -17% -51% -65%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2017* 2017* 2017* 2017* 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2017* 2017* 2017* 2017* 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 *2017 revenue = restated figures NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 23 Looking to the future
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 24 COVID-19 impact clear on shale, but remaining I&W business areas continue to be resilient short and long-term
SHORT TERM IMPACT LONG TERM IMPACT EXPECTED CAGR OF COVID-19 OF COVID-19 2020-2026* Municipal Marginal drop in volumes due to lower activity mainly Expected to grow with around GDP Water in the hospitality industry No changes to previous views 3-4% Treatment
Industrial Temporarily lower industrial activity has decreased Expected to recover with economy and continue to Water chemical demand by 5-10% grow with around GDP 3-4% Treatment No changes to previous views
Oil Sands Volumes lower than expected for Kemira’s end No impact on the long-term tailings treatment market, expected to recover in 2021 Tailings demand 8-9% Treatment
Chemically No impact on active projects and projects in planning No impact expected phase Enhanced ~15% Oil Recovery • Projects long-term in nature, project breaks (cEOR) are expensive
Shale Sharp drop in fracking activity leading to -70% of Industry expected to recover gradually by 2025 Friction Reducer demand for 2020 compared to 2019 Oil & Gas Shale role in future global oil supply to be confirmed 15-20% Market bottom in Q2 followed by modest sequential pick-up during Q3
*Kemira estimates NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 25 APAC, CEOR and oil sands tailings provide strong growth opportunities
GROWING NEED FOR POLYMERS
WATER TREATMENT IN APAC OIL SANDS TAILINGS CEOR • Largest and fastest growing • Market growth driven by regulatory • Exploration and drilling of new water treatment market liability to treat tailings from oil oil wells increasingly expensive; • Expected market CAGR ~5%. sands in Canada ensuring most efficient use of until 2030 • Market expected to grow current wells • Fragmented market; many local significantly into 2030s with tailings • Market expected to grow clearly players with local manufacturing remediation demand expected to until 2030, more moderate continue for at least the next 50 growth until 2050 years
KEMIRA POSITION KEMIRA POSITION KEMIRA POSITION Mainly export business, Strong relationship with Serving customer in the North Sea, focus on premium segment all oil sands operators several other customer pilots ongoing
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 26 Regulation continues to support growth in European water treatment market
Regulation under update Comments & Implications
Urban • Basis for wastewater treatment business in Europe Wastewater • Target to better enforce existing legislation in all countries Treatment Directive • Other potential improvement areas: energy efficiency and micropollutants control (UWWT)* • Revised directive will increase use of coagulants and polymers in non-compliant countries • New regulation expected to be fully operational in late 2025
Water • Regulation evaluated to be fit for purpose and won’t be opened for changes Framework Directive (WFD)
Drinking Water • Only minor changes with small impact: Directive (DWD) – New tighter limits for Lead and Chromium in drinking water • New regulation is expected to be fully operational in 2025
Water Reuse • New EU wide regulation (no additional national implementation required) defining minimum quality standards for water reuse regulation in agriculture • The regulation does not incentivize increased water reuse, however clear quality standards are hoped to boost water reuse
Estimated to increase water treatment chemical demand by ~40 MEUR / p.a. in the long term
* most relevant for Kemira
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 27 Water treatment customers focus increasingly on sustainability
• Consumers increasingly aware of sustainability issues • Water treatment customers increasingly focused on reducing CO2 footprint • Kemira survey shows customers are willing to pay a premium for biobased products • Micropollutant removal and disinfection leading themes currently in sustainable water management
Growing market for sustainable and circular products. Also biobased products growing in importance.
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 28 We will increase focus on water treatment to further improve sustainability of portfolio
24% WE WILL CREATE AN ACTION PLAN TO FURTHER IMPROVE THE SUSTAINABILITY of current raw materials PROFILE OF THE I&W PORTFOLIO from recycled sources Further improve the circularity of our business by increasing share of recycled materials Start building a biobased polymer portfolio Already Increase segment focus on water treatment applications and capabilities up to 80% Increase Oil & Gas focus on growing and less volatile businesses, i.e. CEOR and of raw materials from Oil Sands tailings. Expected recovery in shale recycled sources in provides near-term growth opportunities. coagulants
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 29 Our focus is to maintain profitability while increasing focus on growth
PRIORITIZED GROWTH ACTIONS FURTHER PROFITABILITY • Increase focus on sustainable IMPROVEMENT water treatment business and ON-GOING Oil & Gas profitability look for growth, particularly in • Disciplined price and cost • Cost structure already APAC management streamlined; ready for growth • In Oil & Gas, focus on growing • Continued complexity reduction when shale demand picks up CEOR and oil sands tailings • Capitalize on new polymer asset APAC profitability applications in the Netherlands and upcoming • Organization reorganized, focus • Consider M&A opportunities in polymer investment in Mobile, on growth to improve scale new water treatment capabilities USA, including backward- and strengthening regional integration efficiencies footprint
PROFITABILITY & CASH FLOW GROWTH
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 30
We have strong positions particularly in EMEA water treatment
Market position Market outlook EMEA
Water treatment1,2) #1 North America
Water treatment1) #1 APAC
Water treatment2) #9
Oil & Gas
CEOR2) #6
Shale2) #2
Oil Sands Tailings2) #2
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 I&W main product lines 1) Coagulants 2) Polymers 32 CAPITAL MARKETS DAY 2020
Pulp & Paper: Building on our improved profitability
HARRI ERONEN SVP, PULP & PAPER, EMEA We have strengthened our business and improved profitability since 2017
OPERATIVE EBITDA AND OPERATIVE EBITDA MARGIN DEVELOPMENT 1. BUSINESS FUNDAMENTALS: EUR • Focus on growing segments and product lines million % • Complexity reduction: streamlining P&P product portfolio 250 20 from 1,100 to 800 products 218 • Organizational changes implemented to improve efficiency 198 191 200 192 17.6% 2. PROFITABILITY FOCUS: 16 • Value over volume and active price management 150 14.3% in 2018-2019 13.4% • New investments in bleaching improving efficiency and 12.6% contributing positively to operative EBITDA 100 12 3. ENGAGEMENT SCORES: 50 • Customer satisfaction (NPS): clearly above chemical sector average at 41 in 2020*; positive feedback on Kemira’s handling of COVID-19 0 8 • Safety score: 90/100 2017 2018 2019* 1-9 2020* • Employee engagement score: 82/100 * Includes IFRS16 impact
*average NPS in 2020, data in 2020 limited due to a 6-month break in interviews following COVID-19
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 34 We have significantly AKD WAX INVESTMENT IN CHINA IMPROVING improved profitability ASIA-PACIFIC PROFITABILITY • Manufacturing facility fully operational with in Asia-Pacific positive EBITDA contribution as of Q1 2020 Key actions behind Asia-Pacific profitability • Capacity expansion: produces mainly high- improvement quality AKD wax and water treatment • Result of systematic and hard work to improve chemicals profitability and reduce complexity – AKD is a sizing chemical used in board and • Focus on disciplined price and cost management paper to create resistance against liquid and customer profitability absorption. Enables Kemira to capitalize on growing sustainable packaging trend. • Growth leveraging fixed cost structure • Increases degree of backward-integration • Improved efficiency and expanded capacity following and brings efficiencies and cost savings. recent investments Enables self-sufficiency in all regions globally. APAC REVENUE AND OPERATIVE EBITDA MARGIN DEVELOPMENT
Investment around EUR 70 million, EBITDA contribution EUR double-digit millions (annualized)
2017 2018 2019* 1-9 2020* Operative EBITDA margin Revenue * Includes IFRS16 impact
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 35 Upcoming investments will further strengthen our long-term performance
BLEACHING EXPANSION IN URUGUAY SOUTH KOREA • Multi-year agreement with UPM-Kymmene • Joint Venture with Yongsan Chemicals, includes bleaching capacity to existing Fray Kemira minority shareholder Bentos mill as well as new 2.1 million ton pulp • Polymer investment in a growing market; mill in Paso de los Toros. efficiency improvement from backward- • Expansion of both sodium chlorate and integration hydrogen peroxide at the existing Fray Bentos • Premium dry polymer products: paper and chemical island site packaging mills in APAC and water treatment • The extension will support long-term growth in facilities as end customers bleaching, one of Kemira’s strategic focus • Will support strengthening competitive areas position in APAC • Financial contribution expected as of 2023, • Scheduled opening in H1 2021, ramp-up by investments to take place in 2021-2022 the end of 2021.
INVESTMENT AROUND USD 30 MILLION EQUITY INVESTMENT AROUND EUR 5 MILLION
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 36 Pulp & Paper profitability has been strong in 2020 despite unprecedented situation
REVENUE: PROFITABILITY: • Economic slowdown impacted overall volumes, • Improved profitability due to good management of particularly in printing & writing applications variable and fixed costs. Efficiency improvements and • Pulp, packaging and tissue revenue remained solid capacity expansion from the AKD wax investment in China contributed positively. • Printing and writing revenue declined
REVENUE, ORGANIC REVENUE GROWTH (Y-ON-Y) AND OPERATIVE EBITDA MARGIN* EUR million % 400 385 390 381 383 386 352 20 372 369 363 373 369 376 373 378 357 350 16.0% 15.9% 14.9% 14.4% 13.4% 13.6% 13.3% 13.6% 18.6% 300 12.4% 13.0% 13.1% 18.4% 15 11.6% 12.1% 250 200 10 0% +1% +2% +5% +5% +6% +7% +4% +0% -3% -3% -3% -1% -4% -5% 150 100 5 50 0 0 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 * Includes IFRS16 impact from Q1 2019 onwards NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 37 Looking to the future
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 38 Markets impacted by COVID-19 in the short term, long-term drivers remain solid
SHORT TERM IMPACT LONG TERM IMPACT EXPECTED CAGR OF COVID-19 OF COVID-19 2020-2026* Graphic Paper Demand declined, particularly advertising-driven paper Structural decline and digitalization likely to consumption and office paper demand accelerate -2-3% Printing & Writing demand expected to decline by up Some recovery on print advertisement and office to 20% in 2020 paper possible after situation normalizes
Tissue High demand in H1/2020 Resilient demand Increased demand for more high-quality virgin fiber Megatrends (growing middle-class, growing +2-3% based (at-home) tissue and hygiene products GDP of emerging countries) remain intact
Packaging Strong demand for online and packaged daily E-commerce growth to accelerate consumer goods. Other megatrends (plastics replacement, +2-3% Higher consumer demand will only partly offset the growing urban middle class) remain unchanged falling demand for industrial and B2B-transport packaging Pulp Pulp demand solid Demand supported by packaging and tissue demand Wastepaper collection and sorting interrupted +1-2% Efficient pulp mills coming online forcing high cost and old pulp mills out of market
Sources: RISI, Hawkins Wright, Pöyry, management estimation
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 39 From our existing markets, we see growth opportunities in Asia-Pacific and in Pulp
ASIA - PACIFIC PULP • Customer demand to shift increasingly to • Growth in pulp expected to be driven by Asia-Pacific with most of new board and paper increasing need for packaging and tissue production capacity expected in the region • Demand to shift more towards market pulp • Big customers expected to capture larger and recycled pulp share of the region’s market; emerging • New investments expected to concentrate in sustainability focus of consumers to benefit Northern Europe and South America larger suppliers • Fragmented chemical market with many small and local producers provides opportunities for further consolidation
KEMIRA POSITION KEMIRA POSITION Focused on larger and financially healthy producers Well-positioned to capture selected growth opportunities in Northern Customer market consolidation could create opportunities for Europe and South America through existing strong Kemira to differentiate with full product portfolio offering customer relationships
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 40 We are looking to transform our portfolio more towards biobased products
CUSTOMERS SEEKING ADDED VALUE WE WILL BECOME THE LEADING FROM SUSTAINABILITY AND PROVIDER OF SUSTAINABLE BIOMATERIALS CHEMICAL SOLUTIONS FOR WATER - • Maximizing biocontent in end-products to INTENSIVE INDUSTRIES differentiate from plastic applications -> • Kemira’s aim is to improve customer resource recyclability of products key efficiency, particularly in pulp and packaging • Pulp & Paper companies making increasing • 12% of all carbon containing raw materials investments to renew and broaden wood- used in Kemira is already renewable based end-product portfolio • Ambition to create a green portfolio in the long • Many Pulp & Paper customers announcing term
ambitious sustainability targets related to CO2 • Key product lines strength, sizing and barriers emission reduction and more efficient water as well as retention chemicals usage • Kemira’s current biobased solutions: e.g. sizing agents, such as Sunflower ASA and AKD wax, and rosin
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 41 Barrier market provides interesting opportunities in the long term • Consumers expect significantly more THE BARRIER MARKET IS EXPECTED TO GROW RAPIDLY sustainable packaging from brand-owners EUR billion • Brand owner initiatives Phasing out ”non- Dispersion barrier 12 market (Kemira’s recyclable” packaging materials addressable CAGR +8% 10% 8 market) • Sustainability focus: 500 MEUR 9% currently, 90% – Plastic replacement 4 CAGR 2019-2026 91% – Shift towards green and renewable materials ~10% 0 from fossil-based materials 2019 2026 Source: Smithers Pira Regulations: Kemira relevant market Other barrier applications
• Restrictions to use fluorinated chemicals KEMIRA BARRIER SOLUTIONS (PFAS) • Kemira barriers being trialed with several customers • Global restrictions to move away from single- in EMEA and North America use plastics (e.g. SUP-directive) • Product partly biobased, aim to increase biobased content further in upcoming barrier versions
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 42 Our focus is to maintain profitability while increasing focus on growth
PRIORITIZED GROWTH ACTIONS FURTHER PROFITABILITY • Shift current portfolio more IMPROVEMENT ON-GOING towards packaging and tissue • Continuous performance and • Capture growth in Asia-Pacific • Disciplined price and cost cost-structure enhancement, management particularly in Process & • In Pulp applications, seize growth • Increase share of customer wallet Functional chemicals opportunities in Europe and South America. • Continued complexity reduction • Restructuring of Pulp & Paper Americas organization • Focus on growing biobased • Capitalize on new facilities in market organically or through China and the U.S. and upcoming M&A, particularly in barriers investment in South Korea
PROFITABILITY & CASH FLOW GROWTH
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 43
We have a strong position particularly in EMEA
PULP PACKAGING & TISSUE PRINTING & WRITING EMEA Market position #1/2 #1/2 #1/2 Market outlook North America Market position #3/4 #3 #2/3 Market outlook APAC Market position n.a. #1/2 #1/2 Market outlook South America Market position #2 #2/3 #2/3 Market outlook
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 2020 Source: Kemira estimates 45 CAPITAL MARKETS DAY
Strong foundation to build on
PETRI CASTRÉN CFO We have delivered on our three promises from CMD 2017
HIGHER PROFITABILITY IMPROVED CASH FLOW EFFICIENT CAPITAL RETURNS
OPERATIVE EBITDA CASH FLOW AFTER CAPITAL EMPLOYED OPERATIVE EBITDA MARGIN INVESTING ACTIVITIES OPERATIVE ROCE % (rolling 12 months) EUR EUR EUR million % million million % 1,998 1,977 500 18.0% 20 200 190 2,000 12 1,763 1,781 11.3% 410 11.2% 400 16 150 1,500 9.7% 9.8% 311 323 15.4% 327 8 300 12 12.5% 12.5% 100 97 1,000 200 8 4 50 500 100 4 29 13 0 0 0 0 0 2017 2018 2019* 1-9 2020* 2017 2018 2019 1-9 2020 2017 2018 2019* 1-9 2020*
* Includes IFRS16 impact
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 47 Operative ROCE and EBIT margins have improved in recent years
PULP & PAPER INDUSTRY & WATER OPERATIVE ROCE AND EBIT MARGIN DEVELOPMENT OPERATIVE ROCE AND EBIT MARGIN DEVELOPMENT % % 20 20 17.6%
16 16 13.6% 14.0% 13.3% 11.6% 11.1% 11.2% 11.0% 12 12 10.5% 10.0% 10.2% 9.7% 9.7% 9.8% 8.9% 9.1% 9.0% 11.0% 8.2% 10.9% 7.8% 7.7% 8 9.2% 8 7.7% 7.7% 7.7% 7.7% 7.5% 7.3% 7.1% 7.3% 6.8% 6.8% 6.5% 6.2% 6.5% 6.5% 6.5% 6.0% 5.7% 4 4
0 0 2011 2012 2013 2014 2015 2016 2017 2018 2019* 1-9 2011 2012 2013 2014 2015 2016 2017 2018 2019* 1-9 2020* 2020* ROCE, % EBIT, % ROCE, % EBIT, %
* Includes IFRS16 impact
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 48 Stronger foundation is based on three pillars
1. 2. 3. CUSTOMER PROFITABILITY EFFICIENCY OF OPERATIONS PRODUCT PORTFOLIO • Increased focus on customer-level • Two-segment structure EUR 15 AND MIX profitability since 2017 million • We have clearly simplified the • Share of low margin customers has • Operational excellence program : product portfolio: number of decreased by over 40% since end cost savings of around EUR 20 products decreased by over 30% of 2016 million reached by 2019 from 2017 to 2020 • More concentrated customer base; – E.g. outsourcing of transportation • Investments focused to key product number of customers down by 25% logistics groups: the share of four largest product groups increased from from 2016 to 2020 • Reduction in variable costs around 78% to 82% of revenue following investments in backward from 2017 to 2020 integration • Revenue / sales representative grew by 13% from 2016-2019
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 49 Healthy financial position
DEBT AND LIQUIDITY AS OF SEPTEMBER 30, 2020 MATURITY PROFILE EXCLUDING LEASES • Total interest-bearing debt EUR 972 million 450 400 400 • Liquidity EUR 186 million + undrawn RCF of EUR 400 350 million 300 250 200 200 182 150 156 150 129 100 50 39 Leases 13% 0 121 million 2020 2021 2022 2023 2024 2025 Bilaterals Bonds Others 36% Undrawn RCF Bond NET DEBT (EUR million) AND LEVERAGE RATIO* Other 18% EUR 350 million 866 811 786 EUR 177 million 694** 741** 730** 665**
2.2 2.3 2.0 2.1 1.9 33% Loans from banks and financial institutions EUR 329 million Dec 31 Dec 31 Dec 31 Sep 30 Sep 30 2017 2018 2019 2019 2020 * Leverage ratio = Net debt / last 12 months operative EBITDA ** pre-IFRS 16 figures NOVEMBER 19, 2020 CAPITAL MARKETS DAY 50 Focus on building sustainable growth- target for operative EBITDA margin updated
1. ABOVE-THE MARKET GROWTH (UNCHANGED) +4% NEXT STEPS • Build further growth organically and via partnerships 2,373 2,363 2,486 2,593 2,662 2,137 1,822 • Growth opportunities: water treatment, CEOR, Oil sands tailings, APAC, pulp, recovery in shale • Consider M&A to support profitable growth 2014 2015 2016 2017 2018 2019 1-9 2020
2. OPERATIVE EBITDA MARGIN 15-18% (UPDATED) NEXT STEPS 18% • Maintain operative EBITDA margin within updated range 15.4% • Disciplined price and cost management 11.8% 12.1% 12.8% 12.5% 12.5% • Capitalize on recent and upcoming investments • Profitability improvement actions 2014 2015 2016 2017 2018 2019* 1-9 2020* 3. GEARING BELOW 75% (UNCHANGED)
66% NEXT STEPS 54% 54% 59% 62% 64% 42% • Maintain gearing below financial target range of 75% • Capability to temporarily increase if clear plan to reduce leverage 2014 2015 2016 2017 2018 2019* 1-9 2020*
* Includes IFRS16 impact
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 51 Capital allocation principles
CAPITAL ALLOCATION PRIORITIES CAPITAL EXPENDITURE • Continue to focus on key product areas: bleaching, Balanced capital allocation between: coagulants, polymers and sizing chemicals • Capex expected to be around similar levels in coming Profitable growth years • Investments supporting profitable • Sustainability shift will result in changes in capex growth allocation priorities • Selective M&A opportunities • Capex increasingly allocated towards biobased Shareholder returns opportunities • A competitive and over-time increasing dividend M&A • Solid balance sheet allows us to look for M&A opportunities to enable profitable growth • Areas of interest: water treatment competences, geographic footprint, biobased competences
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 52 The dividend policy has been updated
KEMIRA’S NEW DIVIDEND POLICY
Competitive and over-time increasing dividend No fixed payout ratio
We have a solid dividend track record ◼ Dividend per share Dividend yield
0.56* 0.53 0.53 0.53 0.53 0.53
5.4% 4.9% 4.4% 4.6% 5.4% 5.2%**
2014 2015 2016 2017 2018 2019
*AGM authorized the Board to decide on a dividend payment of max. EUR 0.56 at its discretion to be paid in two installments in May and November. The first installment, EUR 0.28 per share, was paid on May 14, 2020 and the second installment on November 5, 2020 **Dividend yield as of Sep 30, 2020
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 53 Factors to watch for in 2021
FACTORS IMPACTING OPERATIVE EBITDA DEVELOPMENT IN 2021
SUPPORTING UNCERTAINTIES POSSIBLE NEGATIVE • Contribution from recent • Uncertainty related to global FACTORS investments economic situation and its • Time lag to pass raw material • Restructuring in Pulp & impact on customer volumes price increases to sales Paper Americas and Kemira sales volumes prices • Shale market and tailings • Raw material price market expected to recover development gradually from 2020 level • FX development • Part of fixed cost savings to continue
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 54 Investment highlights
Strong profitability improvement track record 1 Focus on profitable sustainable growth Operative EBITDA margin target updated
Attractive dividend 2 Updated dividend policy: competitive and over-time increasing dividend
Increased focus on sustainability 3 Kemira will become the leading provider of sustainable chemical solutions for water-intensive industries
NOVEMBER 19, 2020 CAPITAL MARKETS DAY 55