Kemira Oyj's Half-Year Financial Report 2024: Considerable volume growth and profitability improvement following continued end-market recovery
Kemira Oyj, Half-Year Financial Report, July 17, 2024 at 8.30 am (EEST)
Kemira Oyj's Half-Year Financial Report 2024: Considerable volume growth and profitability improvement following continued end-market recovery
This is a summary of the January-June 2024 Half-Year Financial Report. The complete report with tables is attached to this release and available at kemira.com/investors (https://www.kemira.com/company/investors/).
Second quarter:
Kemira divested its Oil & Gas (O&G)-related portfolio on February 2, 2024. All comparisons in this report are made to the comparison period, which includes the Oil & Gas-related portfolio. Kemira's H1 2024 figures include around EUR 45 million of revenue and around EUR 3 million of operative EBITDA from Oil & Gas. Kemira has also presented Oil & Gas divestment adjusted figures and performance in the relevant parts of the report, which reflect the underlying business performance of Kemira's Pulp & Paper and Industry & Water segments. Kemira's management follows the Oil & Gas divestment adjusted figures. The adjusted figures for the comparison period are also available in a separate stock exchange release, published on February 9, 2024 and on kemira.com/investors (https://www.kemira.com/company/investors/). Kemira's outlook for 2024 includes the Oil & Gas-related portfolio until the closing date of the divestment, February 2, 2024.
Q2 2024 performance, unadjusted for Oil & Gas divestment- Revenue decreased by 13% to EUR 733.4 million (840.1).
- Operative EBITDA decreased by 7% to EUR 140.5 million (151.0). The operative EBITDA margin increased to 19.2% (18.0%). The operative EBITDA margin improved in both segments, particularly in the Industry & Water segment. EBITDA decreased by 7% to EUR 137.1 million (147.4). The differences between operative and reported figures are explained by items affecting comparability, which were mainly related to the divestment of Oil & Gas.
- Operative EBIT decreased by 7% to EUR 94.0 million (100.9). EBIT decreased by 7% to EUR 90.7 million (97.2).
- Cash flow from operating activities was strong at EUR 109.4 million (142.9).
- EPS (diluted) decreased by 4% to EUR 0.40 (0.42) due to the divestment of Oil & Gas and Kemira's decision to close its operations in Argentina.
- The Oil & Gas divestment adjusted revenue increased by 3% to EUR 733.4 million (709.1). Revenue in local currencies, excluding acquisitions and divestments, increased by 1% as growth in the Industry & Water segment compensated for the slight decline in the Pulp & Paper segment. Sales volumes increased considerably year-on-year while sales prices declined, particularly in energy-intensive pulp and bleaching chemicals. Sequentially, sales volumes increased slightly and sales prices declined slightly.
- The Oil & Gas divestment adjusted operative EBITDA increased by 5% to EUR 140.5 million (133.3), following improvement in both segments. The Oil & Gas divestment adjusted operative EBITDA margin increased to 19.2% (18.8%).
- The Oil & Gas divestment adjusted operative EBIT increased by 5% to EUR 94.0 million (89.6).
- Revenue decreased by 14% to EUR 1,496.7 million (1,746.1).
- Operative EBITDA decreased by 12% to EUR 303.0 million (343.7). The operative EBITDA margin increased to 20.2% (19.7%), driven by improvement in the Industry & Water segment. EBITDA decreased by 12% to EUR 291.2 million (331.5). The differences between operative and reported figures are explained by items affecting comparability, which were mainly related to the divestment of Oil & Gas.
- Operative EBIT decreased by 13% to EUR 211.6 million (242.8). EBIT decreased by 13% to EUR 199.9 million (230.6).
- Cash flow from operating activities was strong, at EUR 207.1 million (239.6).
- EPS (diluted) decreased by 13% to EUR 0.89 (1.02), mainly due to the divestment of Oil & Gas.
- The Oil & Gas divestment adjusted revenue decreased by 3% to EUR 1,452.2 million (1,504.6). Revenue in local currencies, excluding acquisitions and divestments, decreased by 4% following revenue decline in the Pulp & Paper segment. Sales volumes increased in both segments. Sales prices decreased, particularly in Pulp & Paper, as sales prices for energy-intensive pulp and bleaching chemicals declined, relative to an elevated comparison period.
- The Oil & Gas divestment adjusted operative EBITDA decreased by 1% to EUR 299.7 million (302.8) due to lower operative EBITDA in Pulp & Paper. The Oil & Gas divestment adjusted operative EBITDA margin was strong at 20.6% (20.1%) following improvement in Industry & Water.
- The Oil & Gas divestment adjusted operative EBIT decreased by 3% to EUR 208.4 million (214.0).
Outlook for 2024 (upgraded on June 10, 2024)
Revenue
Kemira's revenue is expected to be between EUR 2,800 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 540 and EUR 640 million in 2024 (reported 2023 operative EBITDA: EUR 666.7 million).
Assumptions behind the outlook (updated on June 10, 2024)
Kemira's end-market demand (in volumes) is expected to grow in 2024 following expected gradual demand recovery in the pulp and paper market. The water treatment market is also expected to grow 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 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.
Previous outlook for 2024 (published on April 26, 2024)
Revenue
Kemira's revenue is expected to be between EUR 2,700 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 the outlook
Kemira's end-market demand (in volumes) is expected to grow slightly in 2024 following expected gradual demand recovery in the pulp and 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 Kemira's energy-generating assets in Finland. There is uncertainty related to the political strikes in Finland and their implications on Kemira's customers and Kemira. 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 President & CEO, Antti Salminen:
"Our end-markets continued to recover during the second quarter and Kemira's performance was solid, particularly in Industry & Water. I was pleased to see considerable year-on-year sales volume growth as well as slight volume growth from the previous quarter. Organic revenue growth during the quarter was 1% as good growth in Industry & Water compensated for the slight decline in Pulp & Paper. As in Q1 2024, sales prices declined, mainly due to lower sales prices for energy-intensive pulp and bleaching chemicals. The Oil & Gas divestment adjusted operative EBITDA increased to EUR 140 million during the quarter. The operative EBITDA margin was 19.2% in Q2 2024, driven by continued strong performance in Industry & Water. In addition, cash flow continued to be strong, which demonstrates our resilient and cash-generative business model.
This past quarter marked my first full quarter as Kemira's President & CEO. We continued to review our strategic initiatives and financial targets during the quarter, to accelerate the execution of our strategy. Profitable growth remains at the core of our strategy both organically and inorganically; a target which is well supported by our record-strong balance sheet. In early July, we announced our entry into the activated carbon market for micropollutant removal by acquiring an activated carbon reactivation facility in the UK. This is our first step in this market, which we find attractive due to its growth profile. We are in a good position to enter this attractive growth market thanks to our strong market positions in wastewater treatment in Europe and in the US. In early July, we also announced a coagulant capacity expansion in Spain, to meet increasing market needs for biogas applications and phosphorus removal in particular. This expansion is yet another step on our way to significantly expand our water treatment business.
The pulp and paper market continued to recover during the second quarter. Kemira's Pulp & Paper segment's sales volumes increased by about 10% year-on-year while sales prices declined year-on-year, particularly in energy-intensive pulp and bleaching chemicals. As a result, our organic growth during Q2 2024 was slightly negative. The operative EBITDA margin was 16.5%, year-on-year improvement, but lower sequentially following seasonal patterns in pricing and higher impact from annual maintenance breaks.
In Industry & Water, market demand continued to recover, particularly in industrial water treatment. Kemira's Industry & Water segment's organic growth was 3% during the quarter, driven by higher sales volumes. We saw higher sales volumes both year-on-year and sequentially. Sales prices declined slightly, both year-on-year and sequentially. The segment's consistently strong margin performance continued during the quarter, with the operative EBITDA margin at 22.6%.
Going forward, we look at the rest of 2024 with confidence. We upgraded our outlook for 2024 in mid-June, thanks to the continued recovery of our end-markets. As announced in June, we expect revenue to be between EUR 2,800 and 3,200 million and operative EBITDA to be between EUR 540 and 640 million in 2024. In terms of the next steps in our strategy, we will host a Capital Markets Day on September 26 where we will give an update on strategic initiatives as well as on financial targets."
KEY FIGURES AND RATIOS
EUR million Apr-Jun Apr-Jun Jan-Jun Jan-Jun Jan-Dec
2024 2023 2024 2023 2023
Revenue
733.4 840.1 1,496.7 1,746.1 3,383.7
Revenue, O&G
divestment 733.4 709.1 1,452.2 1,504.6 2,889.0
adjusted
Operative
EBITDA 140.5 151.0 303.0 343.7 666.7
Operative
EBITDA, O&G 140.5 133.3 299.7 302.8 595.9
divestment
adjusted
Operative
EBITDA, % 19.2 18.0 20.2 19.7 19.7
Operative
EBITDA %, O&G 19.2 18.8 20.6 20.1 20.6
divestment
adjusted
EBITDA
137.1 147.4 291.2 331.5 540.0
EBITDA, %
18.7 17.5 19.5 19.0 16.0
Operative
EBIT 94.0 100.9 211.6 242.8 463.0
Operative
EBIT, 94.0 89.6 208.4 214.0 415.5
O&G
divestment
adjusted
Operative
EBIT, 12.8 12.0 14.1 13.9 13.7
%
Operative
EBIT 12.8 12.6 14.4 14.2 14.4
%, O&G
divestment
adjusted
EBIT
90.7 97.2 199.9 230.6 336.4
EBIT, %
12.4 11.6 13.4 13.2 9.9
Net profit
for 65.4 67.7 144.4 163.2 211.3
the period
Earnings per
share, 0.40 0.42 0.89 1.02 1.28
diluted,
EUR
Capital
employed* 2,032.1 2,221.5 2,032.1 2,221.5 2,155.5
Capital
employed*, 1,897.8 1,879.6 1,897.8 1,879.6 1,856.0
O&G
divestment
adjusted
Operative
ROCE*, % 21.3 21.0 21.3 21.0 21.5
Operative
ROCE, 21.6 22.4 21.6 22.4 22.4
%, O&G
divestment
adjusted
ROCE*, %
15.0 20.1 15.0 20.1 15.6
Cash flow
from 109.4 142.9 207.1 239.6 546.0
operating
activities
Capital
expenditure 35.0 48.8 61.2 77.9 204.9
excl.
acquisition
Capital
Expenditure 35.0 44.4 61.2 71.1 187.7
excl.
Acquisitions,
O&G
divestment
adjusted
Capital
expenditure 35.0 48.8 61.2 79.7 206.8
Cash flow
after 70.4 103.3 249.2 169.8 349.3
investing
activities
Equity ratio,
% 53 48 53 48 48
at period-end
Equity per
share, EUR 11.03 10.51 11.03 10.51 10.84
Gearing, % at
period-end 21 41 21 41 32
*12-month rolling average
Unless otherwise stated, all comparisons in this report are made to the corresponding period in 2023.
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 on 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 and 2025
Interim report January-September 2024 October 25, 2024
Financial Statements Bulletin for the year 2024 February 11, 2025
Interim report January-March 2025 April 25, 2025
Half-year financial report January-June 2025 July 18, 2025
Interim report January-September 2025 October 24, 2025
The Annual Report 2024 will be published during the week starting on February 17, 2025.
The Annual General Meeting is scheduled for Thursday, March 20, 2025.
Capital Markets Day on September 26, 2024
Kemira would like to invite institutional investors, analysts and relationship bankers to a Capital Markets Day, which will take place in Helsinki on Thursday September 26, 2024. Kemira will provide an update on its strategy and financial targets at the event, which will be attended by Kemira's President & CEO Antti Salminen, CFO Petri Castrén and other members of the Management Board. In addition to the physical event, there will a live webcast of the presentations. More information can be found at kemira.com/cmd (https://www.kemira.com/cmd)
Webcast and conference call for analysts, investors and media
Kemira will arrange a webcast for analysts, investors and the media on Wednesday, July 17, 2024, starting at 10.30 am EEST (8.30 am UK time). During the webcast, Kemira's President & CEO, Antti Salminen and CFO Petri Castrén, will present the results. The webcast will be held in English and can be followed at kemira.com/investors (https://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 conference call. You can access the teleconference by registering on the following link: https://palvelu.flik.fi/teleconference/?id=50047138.
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 operators, 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