Kemira Oyj’s Financial Statements Bulletin 2019: Strong profitability and cash flow in 2019

Kemira Oyj
Financial Statements Release

February 11, 2020 at 8.30 am (CET+1)

Kemira Oyj’s Financial Statements Bulletin 2019: Strong profitability and cash flow in 2019

This is a summary of the Financial Statements Bulletin of 2019. The complete Financial Statements Bulletin 2019 with tables is attached to this release and available at www.kemira.com/investors.

Fourth quarter: Softer quarter due to weakness in shale and new plant start-up costs

• Revenue decreased by 1% to EUR 657.7 million (661.8) due to slightly lower volumes. Revenue in local currencies, excluding acquisitions and divestments, declined by 2%.
• Operative EBITDA increased by 7% to EUR 90.1 million (84.5). The operative EBITDA margin increased to 13.7% (12.8%). The positive impact from the adoption of the IFRS 16 standard was EUR 9.2 million. EBITDA decreased by 14% to EUR 69.6 million (81.3).
• Operative EBIT decreased by 5% to EUR 42.4 million (44.8). EBIT decreased by 47% to EUR 21.9 million (41.1). The differences between operative and reported figures are explained by items affecting comparability, which were mainly caused by a provision for existing, old litigation and increased provisions for environmental liabilities related to a site closure in 2013.
• Cash flow from operating activities improved strongly to EUR 142.5 million (88.2).
• EPS, diluted, decreased by 72% to EUR 0.05 (0.17) due to lower EBIT.

January-December: Strong profitability and cash flow

• Revenue increased by 3% to EUR 2,658.8 million (2,592.8) as sales price increases and currency exchange rates had positive impacts. Revenue in local currencies, excluding acquisitions and divestments, was stable.
• Operative EBITDA increased by 27% to EUR 410.0 million (323.1). In absolute terms, it increased by EUR 86.9 million, of which the adoption of the IFRS 16 standard contributed EUR 34.3 million. The operative EBITDA margin increased to 15.4% (12.5%). EBITDA increased by 21% to EUR 382.3 million (314.8).
• Operative EBIT increased by 29% to EUR 224.0 million (173.8). EBIT increased by 31% to EUR 194.4 million (148.2). The differences between operative and reported figures are explained by items affecting comparability, which were caused by provision for existing, old litigation and increased provisions for environmental liabilities related to a site closure in 2013.
• Cash flow from operating activities improved strongly to EUR 386.2 million (210.2).
• EPS, diluted, increased by 23% to EUR 0.72 (0.58), mainly due to higher EBIT.

Dividend proposal for 2019

The Board of Directors proposes a cash dividend of EUR 0.56 per share (0.53) to the Annual General Meeting 2020, totaling EUR 85 million (81). It is proposed that the dividend be paid in two installments.

Outlook for 2020

Kemira expects its operative EBITDA (2019: EUR 410 million) to increase from the prior year.

Kemira’s President and CEO Jari Rosendal:
“Our strategy execution continued successfully in 2019, although the fourth quarter was negatively impacted by start-up costs related to new plants and lower market demand in the shale business. As we continued to ramp up our new plants in China and the Netherlands during the fourth quarter, we had additional costs and downtime. In Q1 2020 production is expected to run steadier.

Kemira's market environment remained mostly positive during the year, with the exception of Oil & Gas, where we saw visible softening in the North American shale market towards the end of 2019. Throughout the year, we focused on active price management, resulting in clearly improved operative EBITDA. The operative EBITDA margin reached 15.4% in 2019, which is within our financial target range of 15-17%.

In Pulp & Paper, successful price management led to an improvement in the operative EBITDA margin in 2019. Our investment in the AKD wax capacity in China is complete, and the ramp-up of the facility started in Q4. We expect the investment to start gradually contributing to our EBITDA during the first quarter of 2020.  In addition, we have expanded our sodium chlorate capacity in the U.S., which is expected to be fully operational during Q1 2020, after which it will gradually contribute to our figures.

In Industry & Water, we saw good organic revenue growth of 4% in 2019. In addition, our operative EBITDA margin improved to 16.9% due to our growth in Oil & Gas and active price management initiatives, with a clear turnaround in our North American water treatment business. Our expanded Oil & Gas polymers facility in the Netherlands started its ramp-up in Q4 2019, and we expect the investment to start to gradually contribute to our EBITDA from the first quarter of 2020. 

We strive for continuous improvement to reduce our environmental impacts. In 2019, we renewed our commitment to climate action by setting a new target to reduce our combined scope 1 and scope 2 emissions by 30% by the year 2030, from a 2018 baseline (930 thousand tons CO2e). In addition, our long-term ambition is to be carbon neutral by 2045 for combined scope 1 and scope 2 emissions.

We want to thank all our customers, employees, suppliers, shareholders as well as other stakeholders for their continued trust during 2019. We are looking to 2020 with confidence, and we expect our operative EBITDA to increase compared to 2019. Thanks to our good performance in 2019, strong cash flow and favorable business environment, the Board of Directors is proposing to increase the dividend to EUR 0.56 per share.”

KEY FIGURES AND RATIOS

Kemira adopted the IFRS 16 accounting standard on January 1, 2019. In the profit and loss statement, the operating lease expenses are replaced by the depreciation of the right-of-use asset and the interest cost associated with the lease liability. As a result, in February 2019, Kemira estimated that the impact on EBIT would be slightly positive, whereas the impact on the net profit would be immaterial in 2019. Kemira estimated that the adoption of the IFRS 16 accounting standard would increase the EBITDA margin by approximately 1 percentage point and gearing by approximately 10 percentage points. In 2019, the impact on operative EBITDA due to the adoption of the IFRS 16 accounting standard was estimated to be around EUR +30 million. The prior year’s figures are not restated. The key figures (except revenue and capital expenditure) of the profit and loss statement, balance sheet and cash flow have been impacted by the adoption of the IFRS 16 accounting standard. See pages 41-42 for more details.

EUR million	Oct-Dec 2019		Oct-Dec 2018		Jan-Dec 2019		Jan-Dec 2018
Revenue	657.7		661.8		2,658.8		2,592.8
Operative EBITDA	90.1		84.5		410.0		323.1
Operative EBITDA, %	13.7		12.8		15.4		12.5
EBITDA	69.6		81.3		382.3		314.8
EBITDA, %	10.6		12.3		14.4		12.1
Operative EBIT	42.4		44.8		224.0		173.8
Operative EBIT, %	6.4		6.8		8.4		6.7
EBIT	21.9		41.1		194.4		148.2
EBIT, %	3.3		6.2		7.3		5.7
Net profit for the period	8.6		26.5		116.5		95.2
Earnings per share, diluted, EUR	0.05		0.17		0.72		0.58
Capital employed*	1,998.2		1,781.4		1,998.2		1,781.4
Operative ROCE*, %	11.2		9.8		11.2		9.8
ROCE*, %	9.7		8.3		9.7		8.3
Cash flow from operating activities	142.5		88.2		386.2		210.2
Capital expenditure excl. acquisition	81.4		53.2		201.1		150.4
Capital expenditure	82.5		97.6		204.1		193.7
Cash flow after investing activities	60.0		-3.3		189.8		29.0
Equity ratio, % at period-end	43		44		43		44
Equity per share, EUR	7.98		7.80		7.98		7.80
Gearing, % at period-end	66		62		66		62

*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, 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.
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.

DIVIDEND AND DIVIDEND POLICY

On December 31, 2019, Kemira Oyj’s distributable funds totaled EUR 848,948,241 of which net profit for the period was EUR 93,521,333. 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 25, 2020 that a dividend of EUR 0.56 per share totaling EUR 85 million shall be paid on the basis of the adopted balance sheet for the financial year ended December 31, 2019. The dividend will be paid in two installments. The first installment of EUR 0.28 per share will be paid to a shareholder who is registered in the company’s shareholder register maintained by Euroclear Finland Oy on the record date for the dividend payment, March 27, 2020. The Board of Directors proposes that the first installment of the dividend be paid out on April 7, 2020.The second installment of EUR 0.28 per share will be paid in November 2020. The second installment will be paid to a shareholder who is registered in the company’s shareholder register maintained by Euroclear Finland Oy on the record date for the dividend payment. The Board of Directors will decide the record date and the payment date for the second installment at the meeting scheduled for October 26, 2020. According to the current rules of Euroclear Finland, the record date would then be October 28, 2020, and the dividend payment date November 4, 2020, at the earliest.

Kemira’s dividend policy aims to pay a stable and competitive dividend.

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, February 10, 2020

Kemira Oyj
Board of Directors


FINANCIAL CALENDAR 2020

Interim Report January–March 2020                            April 28, 2020
Interim Report January–June 2020                               July 17, 2020
Interim Report January–September 2020                     October 27, 2020

The Annual Report 2019 will be published on February 19, 2020.

The Annual General Meeting will be held in Finlandia Hall on March 25, 2020.

PRESS AND ANALYST CONFERENCE AND CONFERENCE CALL

Kemira will arrange a press conference for analysts, investors, and media on Tuesday, February 11, 2020, starting at 1.30 pm. (11.30 am UK time) at Hotel Kämp, Kluuvikatu 2, 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/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 [phone]
SE [phone]
UK [phone]
US [phone]

Conference ID: 27538399#

*Previously Kemira referred to these three financial targets as mid-to-long term financial targets, but will refer to them only as financial targets going forward.

For more information, please contact:


Kemira Oyj
Mikko Pohjala, Vice President, Investor Relations
Tel. [phone]

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

Attachment

• Kemira Financial Statements Bulletin 2019