Segments

Paper

We offer chemical products and integrated systems that help customers in the water-intensive pulp and paper industry to improve their profitability as well as their water, raw material and energy efficiency. Our solutions support sustainable development.

EUR million Jan–Dec 2012 Jan–Dec 2011
Revenue 1,002.0 973.3
EBITDA 106.2 126.0
EBITDA, % 10.6 12.9
Operative EBIT 86.2 75.4
EBIT 55.2 79.5
Operative EBIT, % 8.6 7.7
EBIT, % 5.5 8.2
Capital employed* 759.8 773.2
ROCE, %* 7.3 10.3
Capital expenditure 66.4 43.5
Cash flow after investing activities, excluding interest and taxes 30.6 90.9
* 12 month rolling average

The Paper segment’s revenue increased 3% to EUR 1,002.0 million (973.3). Revenues in local currencies and excluding divestment grew 2% due to the implemented sales price increases and slightly higher sales volumes. Currency exchange impacted revenues by +3% and the divestment of the hydrogen peroxide plant in Maitland, Canada in November 2011 by -2%.

Demand for pulp started to recover in the beginning of the year after some slow down witnessed in the end of 2011. Sales volumes to the pulp customer segment steadily increased during the year. The demand remained at a good level even in the last quarter of 2012 and pulp revenues reached the level of 2011, excluding the hydrogen peroxide divestment. Sales to the packaging and board customers increased over 10% in 2012 driven mainly by growth in sizing chemical sales in Asia Pacific. The demand for printing and writing remained fairly stable globally and due to extensive sales activity, especially in Europe and North America, Kemira’s product and application related sales grew some 5% to this customer segment. Sales to the tissue and specialty customer segment increased nearly 20% in 2012. Paper segment sales volumes increased to tissue customers, especially in North America. In 2013, sales to tissue customers are expected to accelerate also in China, Indonesia, South America and in Europe.

In 2012, Kemira announced that it would expand hydrogen peroxide capacity in Fray Bentos, Uruguay by mid-2013. The company is also proceeding with its Nanjing paper chemicals production plant in China. The project is now in its pre-sales phase, in anticipation of trial production starting at the end of Q1 2013.

The operative EBIT increased 14% to EUR 86.2 million (75.4). Higher sales prices could more than offset the higher variable costs. Increased sales volumes had a small positive impact on the operative EBIT. The fixed costs were EUR 5 million higher than in the comparable period in 2011, mainly due to increased sales and marketing activities and maintenance related expenses. Currency exchange had a positive impact of EUR 4 million on the operative EBIT. The divestment of the hydrogen peroxide plant in Maitland, Canada in November 2011 had a small negative impact on the operative EBIT. The operative EBIT margin improved to 8.6% (7.7%).

Non-recurring restructuring charges, including the Fit for Growth program amounted to EUR -31 million and were mainly related to asset write-downs, severance payments and external services.


Municipal & Industrial

We offer water treatment chemicals for municipalities and industrial customers. Our strengths are high-level application know-how, a comprehensive range of water treatment chemicals, and reliable customer deliveries.

EUR million Jan–Dec 2012 Jan–Dec 2011
Revenue 686.6 664.7
EBITDA 42.6 74.3
EBITDA, % 6.2 11.2
Operative EBIT 42.3 46.9
EBIT -8.5 43.7
Operative EBIT, % 6.2 7.1
EBIT, % -1.2 6.6
Capital employed* 392.1 403.4
ROCE, %* -2.2 10.8
Capital expenditure 35.2 28.8
Cash flow after investing activities, excluding interest and taxes 23.3 41.9
* 12 month rolling average

The Municipal & Industrial segment’s revenue increased 3% to EUR 686.6 million (664.7). Demand for water treatment chemicals in municipalities recovered throughout the year and resulted together with higher sales prices for inorganic coagulants and flocculants in 2% organic revenue growth. Currency exchange impacted revenues by +2% and divestments by -1%.  

The challenging economic conditions caused a slowdown of sales volumes to the municipal customer segment in the fourth quarter in 2011, especially in East Europe, South Europe and California. In East Europe, sales volumes recovered quickly in the beginning of 2012 followed by California. In South Europe chemical usage in municipal water treatment seems to have stabilized on a lower level.

In the industrial customer segment, the sales volumes remained relatively stable through the year in all main industries. Kemira is focusing on water intensive industries such as the food & beverage, the sugar, the construction, the pharmaceutical and the power generating industries. In addition, solutions for membrane technologies, biogas, fermentation, and bioethanol processes have been developed and are currently in the process of commercialization.

The operative EBIT decreased by 10% to EUR 42.3 million (46.9). Higher sales volumes and prices could offset the negative impact of higher variable costs. Variable costs increased by EUR 12 million in 2012 mainly due to increased sulphuric and hydrochloric acid prices. Fixed costs increased by EUR 6 million mainly due to higher personnel and manufacturing related expenses. Currency exchange had a small positive impact on operative EBIT. Operative EBIT margin decreased to 6.2% (7.1%).

Non-recurring restructuring charges, including the Fit for Growth program amounted to EUR -51 million and were mainly related to asset write-downs, severance payments and external services.

Rationalization of the manufacturing footprint comprises consolidation of the manufacturing network and selected investments to increase competitiveness. Kemira has made the decision that of its 40 coagulant plants, nine will be closed, focusing the development activities to long-term key sites. The aim is to minimize manufacturing and logistic costs through an asset footprint optimization. Coagulants are one of Kemira's core product lines, and ensuring cost efficient supply of raw materials is essential for the business. Kemira is building two coagulants plants next to Bayer MaterialScience's isocyanate production plants in Dormagen, Germany and Tarragona, Spain. This will guarantee long-term, cost-efficient access to hydrochloric acid, one of the raw materials for coagulant manufacturing. Furthermore, these selected investments will reinforce the company’s strong coagulant position. The new plants in Dormagen and Tarragona are expected to be in operation during the second half of 2013.


Oil & Mining

We offer a large selection of innovative chemical extraction and process solutions for the oil and mining industries, where water plays a central role. Utilizing our expertise, we enable our customers to improve efficiency and productivity.

EUR million Jan–Dec 2012 Jan–Dec 2011
Revenue 321.1 335.7
EBITDA 42.6 45.7
EBITDA, % 13.3 13.6
Operative EBIT 37.3 36.2
EBIT 30.2 34.9
Operative EBIT, % 11.6 10.8
EBIT, % 9.4 10.4
Capital employed* 168.8 150.1
ROCE, %* 17.9 23.3
Capital expenditure 15.9 9.6
Cash flow after investing activities, excluding interest and taxes 21.6 28.7
* 12 month rolling average

The Oil & Mining segment’s revenue decreased 4% to EUR 321.1 million (335.7). Revenues in local currencies decreased 2% excluding the negative -6% impact related to exited low margin product sales. Currency exchange impacted revenues by +4%. Acquisitions and divestments did not have an impact on the revenues.

The decline in Oil & Mining sales volumes was mainly due to lower drilling activities specifically caused by low natural gas prices in North America, and a global slowdown in the mining industry because of lower metal prices.

In the end of 2012, Kemira completed a two-year, multi-million euro capacity expansion project at its polymer production plants in North America. This has resulted in a 60% increase in manufacturing capacity at the company’s Mobile, Alabama, Columbus, Georgia and Longview, Washington production sites.

Polymers are core to Kemira’s water technology platform and also play a significant role in growing applications like water reuse, wastewater treatment, rheology control and shale fracturing. The Oil & Mining segment continues to shift its sales mix from products to innovative solutions, improving value creation for the customers.

The operative EBIT increased 3% to EUR 37.3 million (36.2). The operative EBIT improvement was driven mainly by the higher sales prices as Oil & Mining has shifted its sales mix from products into higher value creating solutions. Higher sales prices could partly offset the negative impact of lower sales volumes. Variable costs were EUR 8 million lower due to lower raw material prices. Fixed costs were EUR 5 million higher than in 2011 as a result of investing in sales and marketing resource and related activities. Currency exchange had EUR 3 million positive impact on the operative EBIT. The operative EBIT margin rose to 11.6% (10.8%).

Non-recurring restructuring charges, including the Fit for Growth program amounted to EUR -7 million and were mainly related to asset write-downs, severance payments and external services.


Other

Specialty chemicals (ChemSolutions), such as organic salts and acids, and the Group expenses not charged to the business segments (some research and development costs and the costs of the CEO Office) are included in “Other”. Specialty chemicals products are delivered mainly to the food and feed, the chemicals and the pharmaceutical industries, as well as for airport runway de-icing.

The “Other” revenue remained stable at EUR 231.2 million (233.5). ChemSolutions’ revenues increased slightly to EUR 186.0 million (183.6) as the higher sales prices could more than compensate for somewhat lower sales volumes. ChemSolutions’ products are delivered mainly to the food and feed (about 50% of the ChemSolutions’ revenue), chemical and pharmaceutical industries (about 40%), as well as for airport runway de-icing. In December 2012, Kemira signed an agreement with Niacet Corporation (Niagara Falls, USA) regarding the divestment of ChemSolutions’ food and pharmaceutical businesses. The transaction covered the shares of ChemSolutions B.V. and its manufacturing site in Tiel, the Netherlands. Other businesses of the ChemSolutions’ segment, including the chemical, feed and de-icing businesses will be kept within Kemira. The businesses sold had a revenue of approximately EUR 50 million in 2012. The transaction price was EUR 82 million and will impact Kemira's cash flow positively in the first quarter of 2013.

Revenues other than ChemSolutions are the service revenues in Sweden and Finland.

The operative EBIT decreased to EUR -11.7 million (-1.2). ChemSolutions’ operative EBIT decreased 30% to EUR 14.6 million (20.8). The operative EBIT decreased mainly due to the higher variable costs of EUR 9 million that could not fully be compensated by the respective sales price increases. The extended maintenance shut-down of ChemSolutions’ formic acid plant in Oulu, Finland in the second quarter in 2012 also impacted operative EBIT negatively. ChemSolutions’ operative EBIT margin decreased to 7.8% (11.3%).

“Other” non-recurring restructuring charges, including the Fit for Growth program amounted to EUR -34 million in 2012 mainly related to the EUR -18 million write-down for ChemSolutions’ food and pharmaceutical businesses divestment, other asset write-downs, severance payments and external services.

As of January 1, 2013, ChemSolutions will be reported as a separate segment together with Paper, Municipal & Industrial and Oil & Mining. Revenue other than ChemSolutions and all Group expenses will be allocated to these four segments on a fixed quota basis, and the unit called “Other” will be abolished. Restated figures will be publicly available before the first quarter result release on April 23, 2013.