Kemira Oyj’s Interim Report January-September 2019: Excellent profitability in seasonally strong third quarter
Kemira Oyj
Interim Report
October 24, 2019 at 8.30 am (CET+1)
Kemira Oyj’s Interim Report January-September 2019: Excellent profitability in seasonally strong third quarter
This is a summary of the January - September 2019 Interim report. The complete Interim report with tables is attached to this release and available at .
Third quarter:
- Revenue increased by 3% to EUR 689.8 million (669.6) due to a positive currency impact. Revenue in local currencies, excluding acquisitions and divestments, remained at the previous year’s level as higher sales prices were offset by lower sales volumes.
- Operative EBITDA increased by 33% to EUR 118.1 million (89.0), and in absolute terms by EUR 29.1 million, of which the adoption of the IFRS 16 standard contributes EUR 9.1 million. The operative EBITDA margin increased to 17.1% (13.3%). EBITDA increased by 43% to EUR 118.1 million (82.8).
- Operative EBIT increased by 42% to EUR 71.1 million (50.0). EBIT increased by 93% to EUR 69.2 million (35.9). The differences between operative and reported figures are explained by items affecting comparability.
- EPS, diluted, increased by 94% to EUR 0.27 (0.14), mainly due to higher EBIT.
January-September:
- Revenue increased by 4% to EUR 2,001.1 million (1,931.0) as sales price increases and currency exchange rates had positive impacts. Revenue in local currencies, excluding acquisitions and divestments, increased by 1%.
- Operative EBITDA increased by 34% to EUR 319.9 million (238.6), and in absolute terms by EUR 81.3 million, of which the adoption of the IFRS 16 standard contributes EUR 25.1 million. The operative EBITDA margin increased to 16.0% (12.4%). EBITDA increased by 34% to EUR 312.7 million (233.5).
- Operative EBIT increased by 41% to EUR 181.6 million (129.0). EBIT increased by 61% to EUR 172.5 million (107.1). The differences between operative and reported figures are explained by items affecting comparability.
- EPS, diluted, increased by 62% to EUR 0.67 (0.42), mainly due to higher EBIT.
Kemira’s President and CEO Jari Rosendal:
“We had excellent profitability in seasonally strongest third quarter. Our focus on value over volume is clearly visible in our financial result, as the operative EBITDA margin was 17.1%.
In Pulp & Paper, sales price increases led to an improvement in the operative EBITDA margin to 16.0%. However, we saw some softness and increasing uncertainty regarding market demand. We continue to invest in capacity where the market demand is growing. The investment in our AKD wax manufacturing in China has been completed, and we have already started the ramp up. We will ramp up the plant during Q4, and it will start to contribute gradually in 2020.
In Industry & Water, organic revenue growth was 6% despite the slowdown in the oil & gas shale market, which we saw accelerating during the quarter. Our Chemical Enhanced Oil Recovery and seasonal oil sands tailings water treatment businesses performed well. Our focus on value over volume is bearing fruit and led to an exceptionally high operative EBITDA margin of 18.5% for the segment. We are preparing for the start-up of our CEOR polymer capacity expansion in the Netherlands with related start-up costs in Q4.
In the first nine months of 2019, Kemira achieved an operative EBITDA margin of 16.0%, which is well within our mid- to long-term financial target of 15-17%. Our operational execution is proceeding according to our strategy.”
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, Kemira estimated in February 2019 that the impact on EBIT is small positive, whereas the impact on the net profit is immaterial in 2019. Kemira estimated that the adoption of the IFRS 16 accounting standard increases 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 is 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.
| EUR million | Jul-Sep 2019 | Jul-Sep 2018 | Jan-Sep 2019 | Jan-Sep 2018 | Jan-Dec 2018 | |||||
| Revenue | 689.8 | 669.6 | 2,001.1 | 1,931.0 | 2,592.8 | |||||
| Operative EBITDA | 118.1 | 89.0 | 319.9 | 238.6 | 323.1 | |||||
| Operative EBITDA, % | 17.1 | 13.3 | 16.0 | 12.4 | 12.5 | |||||
| EBITDA | 118.1 | 82.8 | 312.7 | 233.5 | 314.8 | |||||
| EBITDA, % | 17.1 | 12.4 | 15.6 | 12.1 | 12.1 | |||||
| Operative EBIT | 71.1 | 50.0 | 181.6 | 129.0 | 173.8 | |||||
| Operative EBIT, % | 10.3 | 7.5 | 9.1 | 6.7 | 6.7 | |||||
| EBIT | 69.2 | 35.9 | 172.5 | 107.1 | 148.2 | |||||
| EBIT, % | 10.0 | 5.4 | 8.6 | 5.5 | 5.7 | |||||
| Net profit for the period | 43.3 | 22.1 | 107.9 | 68.7 | 95.2 | |||||
| Earnings per share, diluted, EUR | 0.27 | 0.14 | 0.67 | 0.42 | 0.58 | |||||
| Capital employed* | 1,961.8 | 1,759.5 | 1,961.8 | 1,759.5 | 1,781.4 | |||||
| Operative ROCE*, % | 11.5 | 9.8 | 11.5 | 9.8 | 9.8 | |||||
| ROCE*, % | 10.9 | 8.5 | 10.9 | 8.5 | 8.3 | |||||
| Cash flow from operating activities | 121.3 | 64.2 | 243.7 | 122.1 | 210.2 | |||||
| Capital expenditure excl. acquisition | 51.5 | 34.3 | 119.7 | 97.3 | 150.4 | |||||
| Capital expenditure | 51.8 | 36.3 | 121.6 | 96.1 | 193.7 | |||||
| Cash flow after investing activities | 73.1 | 28.8 | 129.9 | 32.3 | 29.0 | |||||
| Equity ratio, % at period-end | 43 | 43 | 43 | 43 | 44 | |||||
| Equity per share, EUR | 7.94 | 7.44 | 7.94 | 7.44 | 7.80 | |||||
| Gearing, % at period-end | 71 | 65 | 71 | 65 | 62 | |||||
*12-month rolling average (ROCE, % based on the EBIT)
Kemira provides certain financial performance measures (alternative performance measures), which 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 > 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 FOR 2019 (UNCHANGED)
Kemira expects its operative EBITDA (2018: EUR 323.1 million) to increase from the prior year on a comparable basis excluding the impact of the IFRS 16 accounting change.
MID- TO LONG-TERM FINANCIAL TARGETS (UNCHANGED)
Kemira aims at above-the-market revenue growth with operative EBITDA margin of 15-17%. The gearing target is below 75%. (Before the adoption of IFRS 16 accounting change as of January 1, 2019, the financial targets were: Kemira aims at above-the-market revenue growth with operative EBITDA margin of 14-16%. The gearing target is below 60%.)
Helsinki, October 23, 2019
Kemira Oyj
Board of Directors
FINANCIAL REPORTING 2019 AND 2020
Financial Statements Bulletin 2019 February 11, 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 the week starting on February 17, 2020.
The Annual General Meeting will be held in the 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 Thursday, October 24, 2019, starting at 1 pm (11 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 . The presentation material and the webcast recording 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 9 8171 0310
SE +46 8 5664 2651
UK 04
US 2
Conference ID: 22787398#
For more information, please contact:
Kemira Oyj
Olli Turunen, Vice President, Investor Relations
Tel. 7
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 2018, Kemira had annual revenue of around EUR 2.6 billion and 4,915 employees. Kemira shares are listed on the Nasdaq Helsinki Ltd.
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