Kemira Oyj
Half-year Financial Report
July 17, 2020 at 8.30 am (CET+1)
Kemira Oyj’s Half-year Financial Report 2020: Good overall performance, outlook for H2 2020 provided
This is a summary of the January - June 2020 Half-year Financial Report. The complete January-June 2020 Financial Report with tables is attached to this release and available at www.kemira.com/investors.
Second quarter: Strong profitability, demand impacted by COVID-19 related economic slowdown
- Revenue decreased by 12% to EUR 582.9 million (663.6) due to lower sales volumes. Revenue in local currencies, excluding acquisitions and divestments, decreased by 12%.
- Operative EBITDA was stable at EUR 105.7 million (106.1) following favorable development of variable costs and good fixed cost management. The operative EBITDA margin increased to 18.1% (16.0%). EBITDA increased by 2% to EUR 103.8 million (102.1).
- Operative EBIT decreased by 4% to EUR 57.6 million (60.3). EBIT decreased by 1% to EUR 55.7 million (56.3). The differences between operative and reported figures are explained by items affecting comparability.
- Cash flow from operating activities remained strong at EUR 60.8 million (57.2).
- EPS, diluted, was EUR 0.22 (0.22).
January-June: Good performance despite the economic slowdown
- Revenue decreased by 7% to EUR 1,224.9 million (1,311.4) due to lower sales volumes. Revenue in local currencies, excluding acquisitions and divestments, decreased by 7%.
- Operative EBITDA increased by 6% to EUR 214.2 million (201.8) due to favorable development of variable costs. The operative EBITDA margin increased to 17.5% (15.4%). EBITDA increased by 9% to EUR 212.2 million (194.6).
- Operative EBIT increased by 7% to EUR 118.4 million (110.4). EBIT increased by 13% to EUR 116.4 million (103.3). The differences between operative and reported figures are explained by items affecting comparability.
- Cash flow from operating activities was good at EUR 111.0 million (122.4).
- EPS, diluted, increased by 16% to EUR 0.47 (0.40), mainly due to higher EBITDA.
Kemira’s President and CEO Jari Rosendal:
"The second quarter of 2020 was impacted by the evolution of the COVID-19 pandemic and the related economic slowdown. Despite the unprecedented situation, there were no significant disruptions to Kemira’s operations. All our manufacturing facilities and supply chain continued to operate with strict safety precautions in place. The economic slowdown related to COVID-19 impacted our sales volumes. The biggest negative impact was visible in our Oil & Gas business, particularly in shale, and overall revenue in Oil & Gas declined by 65%. As a result, group revenue declined by 12% to EUR 582.9 million (Q2 2019: EUR 663.6 million). Profitability, however, remained strong. Our operative EBITDA remained stable at EUR 105.7 million (EUR 106.1 million) thanks to lower variable costs and good management of fixed costs. Our operative EBITDA margin improved from 16.0% to 18.1%.
In Pulp & Paper, the operative EBITDA margin improved to 18.4% in Q2 2020 (14.4%). Customer demand remained fairly resilient during the second quarter, apart from printing and writing demand, which was impacted by the economic slowdown. The ramp-up of our AKD wax facility in China has been successful, and it continued to have a positive contribution to our operative EBITDA during the quarter. In May, we announced a long-term extension to our contract with UPM-Kymmene in Uruguay. The agreement will result in an expansion of bleaching chemical capacity at our Fray Bentos site to serve UPM-Kymmene’s existing pulp mill as well as their new pulp mill in Uruguay. We are very pleased with this extension, as it will support our long-term growth in bleaching, one of our strategic focus areas.
In Industry & Water, the operative EBITDA margin was at a good level of 17.7% in Q2 2020 (18.1%). We saw relatively stable demand in municipal water treatment. Volumes in industrial water treatment declined following the economic slowdown. Demand in shale was very weak during the quarter due to a significant reduction in shale market activity. The polymer facility expansion in the Netherlands continued to contribute positively to our operative EBITDA during the quarter.
Looking ahead, we have provided an outlook for H2 2020. We still see uncertainty related to the development of the COVID-19 pandemic, and our outlook for the second half of 2020 is based on the assumption that our operations will run without significant disruptions. Overall demand in Kemira's end markets in H2 2020 is expected to be approximately at the same level as in Q2 2020 in both segments. In Pulp & Paper, printing and writing demand is expected to remain weak. In Industry & Water, we do not anticipate shale demand to recover in 2020. As a result, we expect the operative EBITDA in H2 2020 to be lower than in H1 2020 (EUR 214 million).
Finally, I would like to thank our employees, suppliers, customers and other stakeholders for their commitment, trust and excellent collaboration during these uncertain times. Our employees have shown that we are able to operate – even under very exceptional circumstances – to ensure our own and our customers' business continuity. I am very proud of this achievement and the whole Kemira team."
KEY FIGURES AND RATIOS
| EUR million | Apr-Jun 2020 | Apr-Jun 2019 | Jan-Jun 2020 | Jan-Jun 2019 | Jan-Dec 2019 | |||||
| Revenue | 582.9 | 663.6 | 1,224.9 | 1,311.4 | 2,658.8 | |||||
| Operative EBITDA | 105.7 | 106.1 | 214.2 | 201.8 | 410.0 | |||||
| Operative EBITDA, % | 18.1 | 16.0 | 17.5 | 15.4 | 15.4 | |||||
| EBITDA | 103.8 | 102.1 | 212.2 | 194.6 | 382.3 | |||||
| EBITDA, % | 17.8 | 15.4 | 17.3 | 14.8 | 14.4 | |||||
| Operative EBIT | 57.6 | 60.3 | 118.4 | 110.4 | 224.0 | |||||
| Operative EBIT, % | 9.9 | 9.1 | 9.7 | 8.4 | 8.4 | |||||
| EBIT | 55.7 | 56.3 | 116.4 | 103.3 | 194.4 | |||||
| EBIT, % | 9.6 | 8.5 | 9.5 | 7.9 | 7.3 | |||||
| Net profit for the period | 35.5 | 35.2 | 75.1 | 64.6 | 116.5 | |||||
| Earnings per share, diluted, EUR | 0.22 | 0.22 | 0.47 | 0.40 | 0.72 | |||||
| Capital employed* | 1,993.5 | 1,901.0 | 1,993.5 | 1,901.0 | 1,998.2 | |||||
| Operative ROCE*, % | 11.6 | 10.8 | 11.6 | 10.8 | 11.2 | |||||
| ROCE*, % | 10.4 | 9.5 | 10.4 | 9.5 | 9.7 | |||||
| Cash flow from operating activities | 60.8 | 57.2 | 111.0 | 122.4 | 386.2 | |||||
| Capital expenditure excl. acquisition | 44.1 | 39.9 | 80.2 | 68.2 | 201.1 | |||||
| Capital expenditure | 44.1 | 41.5 | 82.8 | 69.9 | 204.1 | |||||
| Cash flow after investing activities | 16.6 | 16.9 | 28.1 | 56.7 | 189.8 | |||||
| Equity ratio, % at period-end | 43 | 41 | 43 | 41 | 43 | |||||
| Equity per share, EUR | 7.80 | 7.58 | 7.80 | 7.58 | 7.98 | |||||
| Gearing, % at period-end | 70 | 79 | 70 | 79 | 66 | |||||
*12-month rolling average
Kemira provides certain financial performance measures (alternative performance measures) that are not defined by IFRS. Kemira believes that alternative performance measures followed by capital markets and Kemira management, such as organic growth (revenue growth in local currencies, excluding acquisitions and divestments), EBITDA, operative EBITDA, operative EBIT, cash flow after investing activities as well as gearing, provide useful information about Kemira’s 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 the individual figures may deviate slightly from the sum figure presented.
OUTLOOK
Outlook for July–December 2020
Kemira expects its operative EBITDA in H2 2020 to be lower than in H1 2020 (H1 2020: EUR 214 million).
Assumptions behind Kemira's outlook for July–December 2020:
Overall demand in Kemira's end markets in H2 2020 is expected to be approximately at the same level as in Q2 2020. Demand in Pulp & Paper is expected to remain approximately at the Q2 2020 level, with printing and writing demand to remain weak. Also in Industry & Water, demand is expected to remain approximately at the Q2 2020 level. The shale market is not anticipated to recover in 2020. Kemira's outlook for H2 2020 assumes no significant disruptions to Kemira's manufacturing operations or supply chain.
Previous outlook
On April 27 2020, Kemira withdrew its outlook for 2020 due to the uncertainty following the COVID-19 pandemic and the oil price drop.
FINANCIAL TARGETS
Kemira aims for above-market revenue growth with an operative EBITDA margin of 15–17%.
The target for gearing is below 75%.
Helsinki, July 16, 2020
Kemira Oyj
Board of Directors
FINANCIAL REPORTING SCHEDULE FOR 2020 AND 2021
Interim Report January–September 2020 October 27, 2020
Financial Statements Bulletin 2020 February 11, 2021
Interim Report January-March 2021 April 27, 2021
Half-year Financial Report January-June 2021 July 16, 2021
Interim Report January-September 2021 October 26, 2021
Annual Report 2020 will be published the week starting on February 15, 2021.
The Annual General Meeting is scheduled for Wednesday, March 24, 2021 at 1.00 pm (CET+1).
WEBCAST AND CONFERENCE CALL FOR PRESS AND ANALYSTS
Kemira will arrange a webcast for analysts, investors, and media on Friday, July 17, 2020, starting at 10.30 am (8.30 am UK time). During the webcast, Kemira’s President and CEO Jari Rosendal and CFO Petri Castrén will present the results. The webcast will be held in English and can be followed at www.kemira.com/company/investors. The presentation material and a recording of the webcast 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 (0)9 7479 0361
SE +46 (0)8 5033 6574
UK +44 (0)330 336 9105
US +1 323 794 2093
Conference ID: 8158663
For more information, please contact:
Kemira Oyj
Mikko Pohjala, Vice President, Investor Relations
Tel. +358 40 838 0709
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Kemira is a global chemicals company serving customers in water intensive industries. We provide best suited products and expertise to improve our customers’ product quality, process and resource efficiency. Our focus is on pulp & paper, oil & gas and water treatment. In 2019, Kemira had annual revenue of around EUR 2.7 billion and over 5,000 employees. Kemira shares are listed on the Nasdaq Helsinki Ltd. www.kemira.com
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