Kemira Oyj, Half-year Report, July 18, 2023 at 8.30 am (EEST)
Kemira Oyj’s Half-year Financial Report 2023: Strong performance in Industry & Water compensated for soft pulp and paper market
This is a summary of the January – June 2023 Half-year Financial Report. The complete report with tables is attached to this release and available at kemira.com/investors.
• Revenue decreased by 2% to EUR 840.1 million (861.4). Revenue in local currencies, excluding acquisitions and divestments, increased by 0.5% as revenue growth in Industry & Water compensated for revenue decline in Pulp & Paper.
• Operative EBITDA increased by 24% to EUR 151.0 million (122.1) following strong improvement in the Industry & Water segment. The operative EBITDA margin increased to 18.0% (14.2%). The operative EBITDA margin improved in both segments, particularly in the Industry & Water segment. EBITDA increased by 20% to EUR 147.4 million (123.2). The differences between operative and reported figures are explained by items affecting comparability.
• Operative EBIT increased by 45% to EUR 100.9 million (69.7). EBIT increased by 41% to EUR 97.2 million (69.1).
• Cash flow from operating activities was strong at EUR 142.9 million (41.6)
• EPS (diluted) increased by 43% to EUR 0.42 (0.29) following higher EBIT
• Revenue increased by 7% to EUR 1,746.1 million (1,629.4). Revenue in local currencies, excluding acquisitions and divestments, increased by 8% driven by the Industry & Water segment.
• Operative EBITDA increased by 42% to EUR 343.7 million (242.1) following improvement in both segments. The operative EBITDA margin increased to 19.7% (14.9%) following higher sales prices in both segments. EBITDA increased by 40% to EUR 331.5 million (236.7). The differences between operative and reported figures are explained by items affecting comparability, which were mainly related to a loss from the divestment of most of our colorants business.
• Operative EBIT increased by 75% to EUR 242.8 million (138.6). EBIT increased by 76% to EUR 230.6 million (131.3).
• Cash flow from operating activities was strong at EUR 239.6 million (30.6)
• EPS (diluted) increased by 83% to EUR 1.02 (0.56) following higher EBIT
Outlook for 2023 (unchanged)
Kemira’s revenue is expected to be between EUR 3,200 million and EUR 3,700 million in 2023 (2022: EUR 3,569.6 million).
Kemira’s operative EBITDA is expected to be between EUR 550 and EUR 650 million in 2023 (2022: EUR 571.6 million).
Assumptions behind outlook (specified)
Kemira’s end-market demand (in volumes) is expected to decline. Demand is expected to be resilient in water treatment, while demand in the pulp and paper market is expected to be weak following economic slowdown and continued destocking in the customer value chain. Demand in the oil & gas market is expected to grow. Variable costs overall are expected to decline, while electricity prices are expected to remain above long-term average in Europe. Market prices for caustic soda are expected to moderate during 2023. The outlook assumes no major disruptions to Kemira’s manufacturing operations, supply chain, or Kemira’s energy-generating assets in Finland. Foreign exchange rates are expected to remain at approximately current levels. The outlook is based on Kemira’s current portfolio, including the Oil & Gas business.
Kemira’s Interim President & CEO Petri Castrén*:
“Our business model again proved its resilience during the second quarter as weakness in the pulp and paper market was largely offset by strong performance in the Industry & Water segment. Overall, our financial performance was robust during Q2 2023. Revenue was EUR 840 million with slight organic growth as sales prices increased in both segments. Sales volumes continued to decline following weak demand in the Pulp & Paper segment. Operative EBITDA on the other hand grew year-on-year by 24% to EUR 151 million driven by strong improvement in the Industry & Water segment. The operative EBITDA margin was strong at 18% although we did see a moderation from the exceptionally high level of Q1 2023. Also cash flow during the quarter was very strong.
The pulp and paper market weakened significantly during Q2 2023 following larger and longer-than-expected inventory destocking in the customer value chain. As a result, the segment’s revenue declined by 14% to EUR 421 million as sales volumes declined in line with weak market demand. The operative EBITDA margin improved year-on-year to 15.5%, but it declined from the exceptionally strong level seen during Q1 2023. The ramp-up of the bleaching capacity expansion in Uruguay is progressing as planned.
In Industry & Water, the municipal water treatment market remained resilient, while industrial water treatment was more impacted by the slowdown in the economy. Demand in the oil & gas market remained robust. The segment’s total revenue increased by 12% to EUR 419 million following higher sales prices. Segment sales volumes declined in water treatment, but this was more than offset by growth in Oil & Gas sales volumes. The operative EBITDA margin improved considerably to 20.5% driven by strong performance in water treatment and margin improvement in the Oil & Gas business. In March 2023, we announced a strategic review of the Oil & Gas business. The review is currently ongoing and we will disclose further details in due course.
The pulp and paper market has weakened and market volumes are expected to remain weak during 2023. On the other hand, performance in our Industry & Water segment has been stronger than we anticipated at the start of the year. We have kept our outlook for 2023 unchanged. We expect revenue to be between EUR 3,200 and EUR 3,700 million and operative EBITDA to be between EUR 550 and EUR 650 million (2022: EUR 571.6 million).
Our commitment to sustainability was recognized during the quarter as Kemira was awarded a Platinum level rating for the third consecutive year by EcoVadis. Overall, Kemira is currently in excellent shape: our resilient business model gives us confidence during times of softer market demand and the strong balance sheet also gives us flexibility should interesting M&A opportunities arise.”
*On July 11, 2023, Kemira announced that President & CEO Jari Rosendal will be on sick leave for the time being. On July 18, 2023 Kemira announced that CFO Petri Castrén has been appointed Interim President & CEO.
KEY FIGURES AND RATIOS
|Operative EBITDA, %||18.0||14.2||19.7||14.9||16.0|
|Operative EBIT, %||12.0||8.1||13.9||8.5||10.1|
|Net profit for the period||67.7||46.9||163.2||89.1||239.7|
|Earnings per share, diluted, EUR||0.42||0.29||1.02||0.56||1.50|
|Operative ROCE*, %||21.0||11.8||21.0||11.8||16.2|
|Cash flow from operating activities||142.9||41.6||239.6||30.6||400.3|
|Capital expenditure excl. acquisition||48.8||38.5||77.9||64.7||197.9|
|Cash flow after investing activities||103.3||6.7||169.8||-29.9||222.3|
|Equity ratio, % at period-end||48||43||48||43||46|
|Equity per share, EUR||10.51||10.09||10.51||10.09||10.89|
|Gearing, % at period-end||41||61||41||61||46|
*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.
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 2023 AND 2024
Interim report January-September 2023 October 24, 2023
Financial Statements Bulletin for the year 2023 February 9, 2024
Annual Report 2023 will be published the week starting February 12, 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 PRESS AND ANALYSTS
Kemira will arrange a webcast for analysts, investors, and the media on Tuesday, July 18, 2023, starting at 10.30 am EEST (8.30 am UK time). During the webcast, Kemira’s Interim President & CEO 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=1008734. After the 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:
Mikko Pohjala, Vice President, Investor Relations
Tel. +358 40 838 0709
Kemira is a global leader in sustainable chemical solutions for water-intensive industries. We provide the best-suited products and services to improve our customers’ product quality, process, and resource efficiency. Our focus is on pulp & paper, water treatment, and energy sectors. In 2022, Kemira had annual revenue of around EUR 3.6 billion and around 5,000 employees. Kemira shares are listed on the Nasdaq Helsinki Ltd. www.kemira.com