Focus on Profitability Lasse Kurkilahti, President & CEO Kemira Capital Markets Day Den Haag, September 11, 2007

Transcription

1 Focus on Profitability Lasse Kurkilahti, President & CEO Kemira Capital Markets Day Den Haag, September 11, 2007 September 11,

2 Contents Autumn 2006: Focus into Profitability Autumn 2007: Continued Shareholder Value Creation 2

3 Autumn 2006: Focus into Profitability September 11,

4 Focus from Restructuring into Profitability in Autumn 2006 Global group of leading chemical businesses with unique positions based on customer segment approach and a high degree of mutual synergy Great profitability, continuous profitability improvement (EPS, ROCE) Continuous growth, organic and through M&A Expansion into emerging markets Solution provider leadership driven by customer needs Participative, entrepreneurial corporate culture Continuous increase in shareholder value Primary focus in profitability Strategic goal 2004 in black New emphasis in blue, August

5 From Restructuring to Profitability : Focus on Restructuring Year 2007: Focus into Profitability Bayer paper chemicals agencies 2006 Lanxess paper chemicals 2006 IFAC 2006 Kraski Teks 2006 OOO Gamma and OOO Ohtinski 2007 Finncolor, Prague 2006 Chongquing Lanjie Tap Water Materials 2007 Cytec water treatment chemicals 2006 Parcon 2006 Galvatek 2006 Arkema water treatment chemicals 2007 Dalquim 2007 TRI-K 2007 Tikkurila (Beijing) Paints 2007 Acquisitions total ~ 1 B Revenue ~ 1.4 B Realized deals ~25 E.QU.IP 2004 Finnish Chemicals 2005 Eaglebrook 2004 Kemiron (40%) 2005 Zlotniki 2004 Verdugt 2005 Belinka 2004 Kolorit paints 2004 Kemira Pulp&Paper Kemira Water Kemira Specialty Kemira Coatings Biolchim 2006 Hydrogen peroxide in South Korea 2006 Onepoint Oy 2007 Kemapco 2007 Divestments total ~ 900 M Revenue ~ 1.3 B Realized deals ~12 Fine Chemicals 2004 Calcium Chloride business 2004 GrowHow 2004 Ecocat 2004 Kemira Engineering 2004 Coil coating 2005 UK industrial coatings business

6 Primary Focus in Profitability Economies of scale, utilizing the leading position also towards customers and suppliers Streamlining the production network Idle / low productive capital out Business concept change from products to solutions More new products and solutions to the market Internal synergies to use World class internal efficiency Towards great ROCE 6

7 Leading Positions Reached, Progress in Globalization, Uniqueness and Synergies Criteria for targeted strategic positions Global Leading Unique Synergy Presence in all major markets globally Gaining significant market share in emerging markets (BRIC) Capability to serve global customers with consistency Achievements and challenges No 1 positions globally in the selected market and customer segments We offer superior customer benefits Our solutions help customers to be more competitive and more successfull in their own business Shared knowledge Shared use of assets and infrastructure Best overall use of corporate resources KPP and KW have strong positions in Europe and NA Continued challenges to strenghten positions in emerging markets KPP and KW are globally no 1 KC with regional leadership in North and Eastern Europe and Russia Continued challenges with strenghtening of leading positions Customer segment base approach proceeding >> solution development Challenges to develop and build competences which are needed to create unique customer benefits, solutions Mutual business synergies mainly between KPP and KW Acquisition synergies with Lanxess realised Common IT systems enabling implementation of global business processes and cross BA cooperation Full synergy capture remains a challenge 7

8 Expansion Into Emerging Markets Going Forward Local Operations by Region Revenue, M 2006 Growth Latin-America 40 ~70-80% Asia-Pasific (excl.japan, Korea) 30 ~30-40% E-Europe 310 ~20% Total Revenue, Local Operations % of group NS 15% Total Revenue, incl. Import 540 % of group NS 22% 380 ~30% Revenue 540 M by BA in 2006 KS 120 M KC 260M KPP 80 M KW 80 M Local Operations by BA Revenue, M 2006 Growth KPP 60 ~30-40% KW KC ~30-40% ~20-30% KS 0 ~0% Total 380 ~30% Key events establishing further growth KPP: investments on chemical islands in LA, development of sales and marketing network in LA and Asia KW: Opportunities through Cytec acquisition, investment in China and Brazil KC: investments in Russia for manufacturing and logistics network 8

9 Innovation Productivity Speeding-Up No of notifications Invention Activity '03 '04 '05 '06 '07H1 Invention notifications Notications reserved by business Notifications applied for patent R&D spending and resources BA % of Revenue FTE KPP KW KC KS CC 187* Total * Shared resources on project basis Measures for Innovation Productivity: New Sales Ratio Gross Margin generated by new products vs. R&D costs used for new products 9

10 Progress Towards Strong Corporate Culture Index Kemira Global Climate Index continuously improving Kemira Total KW KC KPP KS CC Global general norm 2007:61,8 2006: 60,8 Index development since 2006 Areas with main positive changes Management and leadership Organisation of work Flow of information Working environment People are heard more often when making decisions concerning them Employer image Areas with main negative changes More bureaucracy Less possibilities for independent decision-making at work More work-related stress Response rate: 2007: 87.6% 2006: 79.6% 2005: 66.5% 2004: 52.5% 10

11 Reaching All-Time High in Revenue Revenue 2006, Pro Forma* ~ EUR 2.8 Billion Kemira Coatings 21 % Latin America 3 % Asia Other 5 % 1 % Eastern Europe 13 % Kemira Pulp&Paper 38 % Kemira Specialty 17 % North America 25 % Kemira Water 24 % Western Europe 53 % *Including Lanxess paper chemicals, Kraski Teks and Cytec water treatment chemicals for the whole year 11

12 Continous Growth: Organic and M&A Revenue and Capital turnover MEUR 3000 Organic growth: +5% +4%** 2 Financial target: Organic growth >5%/a % 1,5 1 **Organic growth in local currencies H , * Q1 Q2 Q3 Q4 Capital turnover *Continuing operations 12

13 Continous Improvement in EPS and ROCE Financial targets: EPS >10%/a ROCE Continous improvement, goal 20% EUR % 1 +23% 0,9 0,8 EPS growth: +46% 0,7 0,6 0,5 0,4 0,3 0,2 0,1 0 +2%** * ROCE, 12-month rolling average **EPS growth H107 * Continuing operations excluding a non-recurring charge of 44.2 MEUR in Q4/04. Q4/06 restated 13

14 Financial Overview M H107 Revenue Operating profit Operating profit, % 7 8 EPS ROCE, %

15 Kemira Pulp&Paper The world's leading supplier of pulp and paper chemicals; extensive solutions spanning throughout the pulp and paper industry's value chain from pulp to paper coating Revenue 2006, pro forma ~ 1,050 MEUR (incl. Lanxess paper chemicals for the whole year) Good market position Globally No 1 Europe No 2 North America No 2 Pigments 2 % Additives 8 % South America 2 % Asia & ROW 5 % Pro forma Paper Chemicals 49 % Pulp Chemicals 41 % North America 37 % Europe 56 % 15

16 Kemira Water The world s leading supplier of inorganic coagulants, ranking third in water treatment polymers. Offers customized water treatment and sludge treatment solutions to municipal and private water treatment plants and industry. Revenue 2006, pro forma ~ 675 MEUR (incl. Cytec water chemicals for the whole year) Municipal 50 % Latin America 5 % Asia 3 % Other 1 % Eastern Europe 8 % Industrial 50 % Western Europe 49 % North America 34 % Pro forma 16

17 Kemira Coatings The leading supplier of paints and coatings in Northern and Eastern Europe, providing consumers and professionals with branded products. Products consist of decorative paints and coatings for the woodworking and metal industries. Revenue 2006, pro forma: 565 MEUR (incl. Kraski Teks for the whole year) Leading market positions in decorative paints Finland No 1 * Sweden No 1 Russia No 1 Baltic No 1 * Poland No 3 Eastern Europe 19 % Western Europe 8 % Other 1 % Finland 20 % * and industrial coatings Russia 27 % Pro forma Sweden 25 % 17

18 Kemira Specialty The leading supplier of specialty chemicals in selected customer segments, serving a wide array of industries (cosmetics, printing ink, food, feed and detergent industries) Revenue 2006: 456 MEUR Good market position TiO2 Pigments: Leading producer of TiO2 for packaging inks and cosmetics ChemSolutions: No 1 globally in selected customer segments Chemidet: No 3 globally Chemidet 12 % Americas 20 % Other 10 % Chem- Solutions 38 % TiO2 pigments 50 % Eastern Europe 3 % Nordic Countries 12 % Western Europe 55 % 18

19 Global Kemira: 140 Sites in 40 Countries Kemira Pulp&Paper Kemira Water Kemira Specialty Kemira Coatings 19

20 Personnel Personnel 30 June 2007: 10,588 (30 June 2006: 9,695) Coatings 40 % (40 %) Other 5 % (8 %) Specialty 11 % (12 %) Pulp&Paper 23 % (25 %) Water 21 % (15 %) Americas 16 % (14 %) Asia 4 % (3 %) Europe 65 % (66 %) Russia 15 % (17 %) Eastern Europe 11 % (11 %) 20

21 Shareholders 14 August September 2007 Finnish State 48.6% International Institutions 22.2% Finnish State 16.5% International Institutions 21.9% Kemira 3.1% Finnish Institutions 17.6% Households 8.5% Oras Invest group 17.1% Varma Pension Insurance 9.6% Ilmarinen Pension Insurance 5.3% Households 8.4 % Kemira 3.1% Other Finnish Institutions 3.1% Minimum state ownership 15% 21

22 Shareholder Value Market cap 10 September 2007: EUR 2,156 million Market cap 31 December 2006: EUR 2,127 million Market cap 31 December 2000: EUR 663 million 22

23 Share Price and Volume 25, ,0 15,0 2005: +33% 2004: +10% 2006: +26% ,0 2003: +40% , , KEMIRA OMX Helsinki CAP FTSE EUROFIRST 300 CHEMICALS VOLUME 23

24 Shareholder Value Creation In the previous Arthur D Little survey, which covered years , Kemira had a position No 1. Source: Arthur D. Little 24

25 Kemira Among Global Top Ten Chemical Companies in Value Creation 25

26 Autumn 2007: Continued Shareholder Value Creation September 11,

27 Strategic Goal Global group of leading chemicals businesses with unique positions based on customer segment approach and high mutual synergy Great profitability, continuous improvement (EPS, ROCE) Continuous growth, organic and through M&A, Expansion into emerging markets Business concept change from products to solution provider driven by customer segment needs Speed-up new product and solution launching Participative, entrepreneurial company culture Continuous enhancement of brand value First priority: profitability, continuous shareholder value creation => More ambition and dynamics New emphasis in blue, August

28 Opportunities within the Business Areas Kemira Pulp & Paper Focus Efficiency improvements Strenghtening solution offering Emerging markets Markets Global market 22 B Market growth 700 M /a Kemira Coatings Focus Market expansion towards East Markets Geographical target market 7 B Market growth > M /a Kemira Water Focus Efficiency improvements Widening the market segment coverage and product/solution offering Markets Global market 8 B Market growth 600 M /a Kemira Specialty Focus Profitabilty and cash flow Markets Global target market 5,5 B Market growth > 200 M 28

29 Customer Segment Approach Creating Platform For Further Growth KPP KW KS KC Pulp Printing & Writing Packaging & Board Tissue & Specialties Oil Field Mining White Minerals Selected Industrial Municipalities Privately operating municipalities Industrial water and waste treatment: food & beverage Oil sector and oil service companies Metals & Mining Chemical industry (3rd party sales) Packaging Inks Cosmetics Paints &Coatings Chemicals & Pharma Food Feed Environment Detergents Approach Competitive strategy to be made by customer segments Organisation structure to support segment strategy execution Decorative Coatings MetalCoatings Wood Processing (furniture, joineries etc) 29

30 Financial Targets EPS growth > 10% / a ROCE Continuous improvement, goal 20% Organic growth > 5% / a Free cash flow Positive after operative investments 30

31 Key Strategic Actions Continued Challenges Profitability and Efficiency Growth Culture Key Strategic Actions Capture full integration synergies from acquisitions Obtain full synergies between KPP and KW Establish truly global functions / shared operations Harmonized processes, including common IT systems and services Global Sourcing and Supply Chain Management Achieve fixed cost savings through disciplined cost management and production network streamlining Implement solution business model build on competences and innovation business model,organisation Continue establishing on emerging markets ensure allocation of resources Continue work towards shared corporate culture Continued Shareholder Value Creation 31

32 Thank You September 11,