Kemira Oyj's Half-year Financial Report 2019: Strong earnings improvement continued in the second quarter of 2019

Kemira Oyj
Half-year Financial Report
July 19, 2019 at 8.30 am (CET+1)

Kemira Oyj's Half-year Financial Report 2019: Strong earnings improvement continued in the second quarter of 2019

This is a summary of the January - June 2019 Half-year Financial Report. The complete January - June 2019 Financial Report with tables is attached to this release and available at www.kemira.com/company/investors.

Second quarter:

• Revenue increased by 2% to EUR 663.6 million (647.6) due to a positive currency impact while higher sales prices were offset by lower sales volumes. Revenue in local currencies, excluding acquisitions and divestments, remained at the previous year's level.
• Operative EBITDA increased by 32% to EUR 106.1 million (80.2), by EUR 25.9 million, of which IFRS 16 standard explains EUR 8.3 million. Operative EBITDA margin increased to 16.0% (12.4%). EBITDA increased by 24% to EUR 102.1 million (82.5).
• Operative EBIT increased by 34% to EUR 60.3 million (45.1). EBIT increased by 46% to EUR 56.3 million (38.5). The differences between operative and reported figures are explained by items affecting comparability.
• EPS increased by 54% to EUR 0.22 (0.14) mainly due to higher EBIT

January-June

• Revenue increased by 4% to EUR 1,311.4 million (1,261.4) as sales price increases and currency exchange rates impacted positively. Revenue in local currencies, excluding acquisitions and divestments, increased by 1%.
• Operative EBITDA increased by 35% to EUR 201.8 million (149.6), by EUR 52.2 million, of which IFRS 16 standard explains EUR 16.0 million. Operative EBITDA margin increased to 15.4% (11.9%). EBITDA increased by 29% to EUR 194.6 million (150.7).
• Operative EBIT increased by 40% to EUR 110.4 million (79.0). EBIT increased by 45% to EUR 103.3 million (71.2). The differences between operative and reported figures are explained by items affecting comparability.
• EPS increased by 43% to EUR 0.40 (0.28) mainly due to higher EBIT.

Kemira's President and CEO Jari Rosendal:

"Kemira's strong performance continued in the second quarter. Our focus on value over volume is bearing fruit. Effective price and cost management combined with favorable raw material price development led to operative EBITDA margin of 16.0%.

In Pulp & Paper, operative EBITDA margin improved to 14.4% despite some softness in the short-term market demand. Operationally business is moving ahead with focus on higher value-adding products and increasing capacity where the market demand is high. By the end of the year, we expect to ramp-up the new AKD wax manufacturing site in Yanzhou, China.

In Industry & Water, the combination of higher sales prices and favorable raw material price fluctuations led to an exceptionally high operative EBITDA margin of 18.1% for the segment. Capacity utilization rates are high and the product mix has improved. Specifically in the North American oil & gas business the growth continued at very high rate, partly thanks to the seasonal oil sands tailings treatment business. With regard to growth investments, we expect to ramp-up additional Chemical Enhanced Oil Recovery polymer capacity in the Netherlands during the second half of the year.

In the first half of 2019, Kemira reached operative EBITDA margin of 15.4%, which is within our mid- to long-term 15-17% financial target range. The good progress shows that our strategy execution is on the right track."

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 interest cost associated with lease liability. As a result, it is estimated 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 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	Apr-Jun 2019	Apr-Jun 2018	Jan-Jun 2019	Jan-Jun 2018	Jan-Dec 2018
Revenue	663.6	647.6	1,311.4	1,261.4	2,592.8
Operative EBITDA	106.1	80.2	201.8	149.6	323.1
Operative EBITDA, %	16.0	12.4	15.4	11.9	12.5
EBITDA	102.1	82.5	194.6	150.7	314.8
EBITDA, %	15.4	12.7	14.8	11.9	12.1
Operative EBIT	60.3	45.1	110.4	79.0	173.8
Operative EBIT, %	9.1	7.0	8.4	6.3	6.7
EBIT	56.3	38.5	103.3	71.2	148.2
EBIT, %	8.5	5.9	7.9	5.6	5.7
Net profit for the period	35.2	23.5	64.6	46.6	95.2
Earnings per share, EUR	0.22	0.14	0.40	0.28	0.58
Capital employed*	1,901.0	1,754.6	1,901.0	1,754.6	1,781.4
Operative ROCE*, %	10.8	9.7	10.8	9.7	9.8
ROCE*, %	9.5	8.3	9.5	8.3	8.3
Cash flow from operating activities	57.2	23.4	122.4	57.9	210.2
Capital expenditure excl. acquisition	39.9	39.8	68.2	63.0	150.4
Capital expenditure	41.5	37.4	69.9	59.8	193.7
Cash flow after investing activities	16.9	-12.9	56.7	3.5	29.0
Equity ratio, % at period-end	41	43	41	43	44
Equity per share, EUR	7.58	7.42	7.58	7.42	7.80
Gearing, % at period-end	79	67	79	67	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 www.kemira.com > 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 to increase from the prior year (2017: EUR 311.3 million).

MID- AND 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, July 18, 2019

Kemira Oyj
Board of Directors


REPORTING CALENDAR 2019 AND 2020

Interim Report January-September 2019 October 24, 2019
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

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 Friday, July 19, 2019, starting at 1 pm. 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 [phone]
SE [phone]
UK [phone]
US [phone]


Conference ID: 86550162#

For more information, please contact:


Kemira Oyj
Olli Turunen, Vice President, Investor Relations
Tel. [phone]

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. www.kemira.com

Attachment

• Kemira Half-year Financial Report 2019 (.pdf) (https://ml-eu.globenewswire.com/Resource/Download/f12d929a-9649-4322-b4ec-9b4abb42d8df)