Kemira Oyj’s Financial Statements Bulletin 2023: Record profitability in 2023; entering a new year with a focused business portfolio

Kemira Oyj’s Financial Statements Bulletin 2023: Record profitability in 2023; entering a new year with a focused business portfolio

This is a summary of the Financial Statements Bulletin 2023. The complete report with tables is attached to this release and available at kemira.com/investors.

Fourth quarter: Strong performance      

•    Revenue decreased by 16% to EUR 808.8 million (968.2). Revenue in local currencies, excluding acquisitions and divestments, decreased by 13.0% mainly due to lower sales prices in energy-intensive pulp and bleaching chemicals.

•    Operative EBITDA decreased by 8% to EUR 162.7 million (177.0) mainly following lower sales prices in energy-intensive pulp and bleaching chemicals. The operative EBITDA margin increased to 20.1% (18.3%). The operative EBITDA margin improved in both segments year-on-year and sequentially in the Pulp & Paper segment. EBITDA decreased by 72% to EUR 51.3 million (184.8). The differences between operative and reported figures are explained by items affecting comparability, which were mainly related to the expected loss from the divestment of the Oil & Gas business.

•    Operative EBIT decreased by 9% to EUR 112.6 million (123.4). EBIT decreased by 99% to EUR 1.3 million (131.8) mainly due to the expected loss from the divestment of the Oil & Gas business.

•    Cash flow from operating activities was strong, at EUR 133.3 million (254.9)

•    EPS (diluted) decreased by 134% to EUR -0.20 (0.57) mainly due to the expected loss from the divestment of the Oil & Gas business.

January-December: Record profitability

•    Revenue decreased by 5% to EUR 3,383.7 million (3,569.6). Revenue in local currencies, excluding acquisitions and divestments, decreased by 2% as the impacts from the weak pulp and paper market were not fully compensated by revenue growth in the Industry & Water segment.

•    Operative EBITDA increased by 17% to a record-high of EUR 666.7 million (571.6) following strong improvement in the Industry & Water segment. The operative EBITDA margin increased to 19.7% (16.0%) with both segments reporting record-high margins. EBITDA decreased by 3% to EUR 540.0 million (558.8). The differences between operative and reported figures are explained by items affecting comparability, which were mainly related to the expected loss from the divestment of the Oil & Gas business.

•    Operative EBIT increased by 28% to EUR 463.0 million (361.6). EBIT decreased by 3% to EUR 336.4 million (347.6).

•    Cash flow from operating activities was very strong at EUR 546.0 million (400.3).

•    EPS (diluted) decreased by 14% to EUR 1.28 (1.50) mainly due to the expected loss from the divestment of the Oil & Gas business.

Dividend proposal for 2023

The Board of Directors proposes to the Annual General Meeting 2024 a cash dividend of EUR 0.68 per share (0.62), totaling EUR 104 million (95). It is proposed that the dividend be paid in two installments, in April and November.

Divestment of Oil & Gas

On December 5, 2023, Kemira announced that it is divesting its Oil & Gas-related portfolio to Sterling Specialty Chemicals LLC. The divestment was closed on February 2, 2024 as announced by Kemira. Kemira has published relevant alternative key figures in conjunction with its financial statements bulletin on February 9, 2024. The alternative key figures are not included in this report, but they are available in a separate stock exchange release and on kemira.com/investors. The Oil & Gas portfolio has been classified as held for sale until closing. Kemira’s outlook for 2024 includes the Oil & Gas-related portfolio until the closing date of the divestment, February 2, 2024.The divested Oil & Gas-related portfolio had a revenue of around EUR 495 million and an operative EBITDA of around EUR 71 million in 2023.

Outlook for 2024

Revenue

Kemira’s revenue is expected to be between EUR 2,700 million and EUR 3,200 million in 2024 (reported 2023 revenue: EUR 3,383.7 million).

Operative EBITDA

Kemira’s operative EBITDA is expected to be between EUR 480 and EUR 580 million in 2024 (reported 2023 operative EBITDA: EUR 666.7 million).

Assumptions behind outlook

Kemira’s end-market demand (in volumes) is expected to grow slightly in 2024 following expected gradual demand recovery in the pulp & paper market. The water treatment market is expected to remain steady in 2024. Input costs are expected to remain rather stable during the year. The outlook assumes no major disruptions to Kemira’s manufacturing operations, supply chain or to Kemira’s energy-generating assets in Finland. Foreign exchange rates are expected to remain at approximately current levels.

The outlook for 2024 includes the Oil & Gas business until February 2, 2024, the closing date of the divestment transaction.

Kemira’s Interim President & CEO, CFO Petri Castrén:

“Kemira’s organization and business model continued to prove their resilience, with consistently strong performance throughout 2023. The past year was excellent for Kemira in terms of profitability as our operative EBITDA reached EUR 667 million, an all-time high. Relative profitability was also at a record-high, 19.7%. Our Industry & Water segment had an outstanding year, which compensated for relative weakness in the pulp & paper market. Kemira’s revenue declined somewhat, to EUR 3,400 million, mainly following lower sales volumes in Pulp & Paper. Operative return on capital employed also reached a record-high of 21.5% thanks to our excellent profitability performance and good net working capital management. Our balance sheet is very strong as net debt to operative EBITDA reached 0.8 at the end of 2023. Following our excellent performance in 2023, Kemira’s Board of Directors is proposing to increase the dividend to EUR 0.68 per share, to be paid in two installments in April and November.

In December, Antti Salminen was appointed President & CEO of Kemira as of February 12, 2024. Our long-serving President & CEO Jari Rosendal passed away unexpectedly on July 31, 2023. We are thankful for Jari’s legacy at Kemira and I am pleased to hand over to Antti to take Kemira’s profitable growth strategy to the next level. Antti has been with Kemira since 2011 and he has a very successful track record in leading our both segments. I will return to my original position as Kemira’s CFO having also carried the Interim President and CEO role since July 2023. I would like to thank our customers, our employees and all our other stakeholders for making 2023 such a successful year for Kemira.

In 2023, we began reviewing options for our Oil & Gas business, in line with our strategy. In December 2023, we announced the divestment of the Oil & Gas-related portfolio and the transaction was successfully completed on February 2, 2024. The divestment will clarify our strategy and our focus on sustainability. It will also further improve our opportunities to concentrate on our strategic focus areas: growing in water, building a leading renewable solutions portfolio and creating a digital services business. In 2023, we made progress with our renewable solutions strategy and announced the next steps in our partnership with IFF in December.

The pulp & paper market saw a sudden and unexpected market downturn during 2023. The market started to show early signs of improvement in Q3 and the improvement continued in Q4 2023. Despite the market downturn, our Pulp & Paper performance was resilient with a very strong ending to the year. The segment’s operative EBITDA margin reached a record-high, 18.9% in 2023, clearly illustrating the integral nature of our products in the pulp and paper value chain. We were pleased with the sequential volume and margin improvement in Q4 2023. During the year, we also completed our bleaching chemical capacity expansion in Uruguay.

In Industry & Water, market demand remained resilient in water treatment, while the oil & gas market grew, driven by shale in particular. The Industry & Water segment had record-high profitability, with the operative EBITDA margin reaching 20.5% in 2023, driven by strong performance in water treatment. The Oil & Gas business also had a good year, with increasing sales volumes and improving profitability. During the year, in line with our ambition to grow in water treatment, we announced a coagulant capacity expansion project in the UK.

2023 was a strong year for Kemira. We view 2024 with confidence as our businesses are in excellent shape. In 2024, we expect revenue to be between EUR 2,700 and 3,200 million and operative EBITDA to be between EUR 480 and 580 million. When reading our outlook for 2024, do consider that the outlook reflects the Pulp & Paper and water treatment businesses only as we divested the Oil & Gas business on February 2, 2024.”

KEY FIGURES AND RATIOS

*12-month rolling average

Unless otherwise stated, all comparisons in this report are made to the corresponding period in 2022.
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 revenue growth in local currencies, excluding acquisitions and divestments (=organic growth), EBITDA, operative EBITDA, operative EBIT, cash flow after investing activities, and 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 from 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 report have been individually rounded, and consequently the sum of the individual figures may deviate slightly from the total figure presented.
Financial targets

Kemira aims for above-market revenue growth, with an operative EBITDA margin of 15-18%. The target for gearing is below 75%.

Financial reporting schedule 2024

Annual Report 2023       February 16, 2024.

Interim report January-March 2024    April 26, 2024

Half-year financial report January-June 2024   July 17, 2024

Interim report January-September 2024    October 25, 2024

The Annual General Meeting is scheduled for Wednesday, March 20, 2024.

Webcast and conference call for analysts, investors and media

Kemira will arrange a webcast for analysts, investors and the media on Friday, February 9, 2023, starting at 10.30 am EET (8.30 am UK time). During the webcast, Kemira’s Interim President & CEO, CFO Petri Castrén, will present the results. The webcast will be held in English and can be followed at kemira.com/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 conference call. You can access the teleconference by registering on the following link: http://palvelu.flik.fi/teleconference/?id=10010849

After registration you will be provided with phone numbers and a conference ID to access the conference. If you wish to ask a question please dial *5 on your telephone keypad to enter the queue.

For more information, please contact:

Kemira Oyj

Mikko Pohjala, Vice President, Investor Relations

Tel. +358 40 838 0709
mikko.pohjala@kemira.com

Kemira is a global leader in sustainable chemical solutions for water-intensive industries. Our customers include industrial and municipal water treatment, and pulp & paper industry among others. We provide the best-suited products and services to improve our customers’ product quality, process, and resource efficiency. Our focus is on water treatment, renewable solutions, and digital services. In 2023, Kemira had annual revenue of around EUR 3.4 billion and around 5,000 employees. Kemira shares are listed on the Nasdaq Helsinki Ltd. www.kemira.com