Kemira Oyj’s January - September 2023 Interim Report: Continued strong profitability driven by record quarter in Industry & Water

Kemira Oyj, Interim Report, October 24, 2023 at 8.30 am (EEST)

Kemira Oyj’s January - September 2023 Interim Report: Continued strong profitability driven by record quarter in Industry & Water

This is a summary of the January - September 2023 Interim Report. The complete report with tables is attached to this release and available at kemira.com/investors.

Third quarter:   

•    Revenue decreased by 15% to EUR 828.7 million (971.9). Revenue in local currencies, excluding acquisitions and divestments, decreased by 9% mainly due to lower sales volumes in Pulp & Paper following a weak market environment.  

•    Operative EBITDA increased by 5% to EUR 160.3 million (152.5) due to strong improvement in the Industry & Water segment. The operative EBITDA margin increased to 19.3% (15.7%). The operative EBITDA margin improved in the Industry & Water segment and remained stable in the Pulp & Paper segment. EBITDA increased by 15% to EUR 157.2 million (137.3). The differences between operative and reported figures are explained by items affecting comparability, which were mainly related to portfolio actions.  

•    Operative EBIT increased by 8% to EUR 107.6 million (99.5). EBIT increased by 24% to EUR 104.5 million (84.5).  

•    Cash flow from operating activities was very strong, EUR 173.1 million (114.8).

•    EPS (diluted) increased by 23% to EUR 0.46 (0.38) following higher EBIT.

January-September:

•    Revenue decreased by 1% to EUR 2,574.8 million (2,601.3). Revenue in local currencies, excluding acquisitions and divestments, increased by 2% as the impacts from the weak pulp and paper market were compensated by revenue growth in the Industry & Water segment.

•    Operative EBITDA increased by 28% to EUR 504.0 million (394.6) following strong improvement in the Industry & Water segment. The operative EBITDA margin increased to 19.6% (15.2%) following higher sales prices in both segments as well as lower variable costs. EBITDA increased by 31% to EUR 488.7 million (374.0). 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 and portfolio actions.

•    Operative EBIT increased by 47% to EUR 350.4 million (238.1). EBIT increased by 55% to EUR 335.1 million (215.8).

•    Cash flow from operating activities was very strong at EUR 412.7 million (145.4). 

•    EPS (diluted) increased by 59% to EUR 1.48 (0.93) following higher EBIT.

Outlook for 2023 (upgraded on October 10, 2023)

Revenue

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).

Operative EBITDA

Kemira's operative EBITDA is expected to be between EUR 620 and EUR 680 million in 2023 (2022: EUR 571.6 million).

Assumptions behind outlook (unchanged)

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 previous outlook for 2023 (published July 18, 2023)

Revenue:
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).

Operative EBITDA:
Kemira's operative EBITDA is expected to be between EUR 550 and EUR 650 million in 2023 (2022: EUR 571.6 million).

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

"We experienced great sorrow as Jari Rosendal, Kemira's long-serving President & CEO, passed away unexpectedly after a short illness on July 31, 2023. We are grateful for Jari's legacy at Kemira. Under his leadership, Kemira’s profitability improved significantly, and the strategic focus shifted towards sustainable profitable growth. Kemira's strategy remains clear and is unchanged with a strong desire to grow in water-related applications. Until a new President & CEO takes the helm, I will act as the Interim President & CEO to oversee strategy execution.

Our strong financial performance during Q3 2023 was yet another demonstration of our resilient business model. We were pleased that our operative EBITDA increased both year-on-year and sequentially. Revenue was EUR 829 million and it declined mainly due to lower sales volumes in the Pulp & Paper segment following a weak market environment. Also sales prices decreased. Sales prices for energy-intensive pulp and bleaching chemicals increased significantly during Q3 2022 - Q1 2023 following exceptionally high energy prices, which are now normalizing resulting in a more normalized pricing environment for pulp and bleaching chemicals. In terms of profitability, operative EBITDA increased year-on-year by 5% to EUR 160 million driven by the Industry & Water segment. The operative EBITDA margin was strong at 19.3% following strong margin improvement in Industry & Water and steady margin performance in Pulp & Paper. Cash flow was also very strong during the quarter.

The pulp and paper market volumes remained weak during Q3 2023 as a weaker economic environment and inventory destocking continued to impact our customers. There are early signs that the market has reached the bottom but there is no meaningful recovery in sight yet. The segment's organic revenue growth was -19% due to lower sales volumes and sales prices for energy-intensive pulp and bleaching chemicals. However, sequentially we saw modest volume growth. The operative EBITDA margin was stable year-on-year at 17.1%. It improved sequentially, which is an excellent achievement in a difficult market environment.

The Industry & Water segment had a record quarter in terms of absolute operative EBITDA and margin. Market trends remained largely similar as in Q2 2023: steady demand in municipal water treatment, while industrial water treatment was more impacted by the slowdown in the economy. Demand in the oil and gas market was good. The segment's organic revenue growth was 3% driven by higher sales prices. Sales volumes were stable during the quarter. The operative EBITDA margin continued to improve and reached 21.5%, an all-time high. 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.

Following our strong performance, we upgraded our outlook for operative EBITDA already on October 10, 2023. We now expect revenue to be between EUR 3,200 and EUR 3,700 million and operative EBITDA to be between EUR 620 and EUR 680 million (2022: EUR 571.6 million)."

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

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, October 24, 2023, starting at 10.30 am EEST (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=1008735. 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. 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