CEO’s Review

 

As Kemira’s CEO as of April 2012, how would you describe the company’s year?

2012 was a year of change for Kemira. Since I assumed the responsibility as the CEO of Kemira, my most evident key priorities for Kemira going forward have been: improving profitability, accelerating growth in Asia and South America without sacrificing business opportunities in the mature markets and sharpening the strategy. In 2012, we initiated projects in all three focus areas.

The second quarter results underlined the fact that we needed to take actions in order to ensure sustainable profitability and competitive strength for Kemira. On July 26, 2012 we launched our restructuring program Fit for Growth to increase the efficiency of the company and, at the same time, to simplify the structure of the company. With Fit for Growth, we are aiming to reduce our annual operating expenses by EUR 60 million, which we aim to reach in 2014. The restructuring required the rebalancing of our asset footprint and, unfortunately, also a workforce balancing. From the CEO’s point of view, reducing workforce is always a tough decision to take. However, Fit for Growth is fundamental for Kemira’s growth, and growth is the key enabler for a successful future.  

Kemira’s new organization has been put in place and is operational since October 1, 2012. It is based on regional business units, enabling us to be in closer interaction with our customers. The business responsibility is now delegated into different regions, and within the regions we have clarified the employees’ roles and responsibilities in order for each employee to clearly understand their respective roles in fostering the company’s success. The rationale behind the organizational change was to make the organization more proactive and more agile, but at the same time to decentralize the organization in a way that business decisions can be taken closer to the customers.

In 2012, we also started to sharpen our strategy, putting even stronger emphasis on water quality and quantity management. We see our role as one of helping companies and municipalities to either reduce the water consumption or improve the energy and raw material efficiency in water intensive processes.

How do you perceive Kemira’s market development and position in the course of the year?

The overall market condition was challenging in 2012, primarily due to the European crisis. Our markets were more or less stagnating globally; even the demand in Asia slowed down for some period during the summer.

As a result, the demand for water treatment chemicals was reduced in Southern and Eastern Europe as well as in parts of the US at the end of 2011 and beginning of 2012. The demand has recovered, except in Southern Europe, where it has stabilized at a lower level.

In terms of the competitive environment, a number of major acquisitions took place in 2012. During the year, a few companies started to move more seriously into the water quality and quantity management business. Water intensive industries are seen as an interesting market also for the long term by many players. Especially the oil and mining market is considered very important, as long-term growth in demand is expected and there is a need to make resources available with the lowest environmental impact and at the lowest possible energy costs.

Kemira managed to improve its market position in Asia, particularly in the paper industry. Paper, Kemira’s largest segment, saw a clear shift in its industry during 2012. The growth in pulp market is moving to South America and the growth in packaging & board, tissue and paper markets is moving increasingly to Asia. The ongoing investment in Nanjing, China will benefit from the growing importance of the paper industry in Asia.

In regard to market development, we are not expecting any substantial changes in 2013 as the uncertainties prevail, although we are expecting the global economy to grow by 3 percent, which should provide Kemira with sufficient growth opportunities.

How would you describe the year from an R&D perspective?

R&D is the critical enabler for organic growth and further differentiation. The focus of R&D at Kemira is to develop products and solutions for customer applications that allow our customers to be both more successful and sustainable at the same time. In 2012 we made good inroads e.g. in Oil & Mining  – an industry with growing importance in the United States – by developing antiscalants for making shale gas more economically available. Other advancements have been made in the paper industry, where new products have been introduced to the market to make paper production more economical.

What role does sustainability play for Kemira?

Sustainability is increasingly important to global companies: failing to meet environmental requirements and a lack of clear sustainability targets is not acceptable anymore under prevailing standards of corporate governance. At Kemira, our targets include striving for both zero accidents and reduced environmental impacts. Moreover, we are committed to constantly improve our resource and energy efficiency. Going beyond Kemira’s own sustainability targets, we are also helping our customers to be more sustainable through our focus on water quality and quantity management. Improving the energy efficiency of industrial processes, reducing the consumption of water or increasing the reuse of water in industrial processes, and cleaning the water post-usage are all means to preserve this precious resource.

What can be expected from Kemira in 2013 and beyond?

2013 will be the year of implementation. We continue with the implementation of our “Fit for Growth” restructuring program, but also start to focus on growth by presenting and implementing our sharpened strategy. Kemira will continue to focus on improving its profitability and reinforcing a strong cash flow. The company will also secure future growth by additional investments.

The basis for growth is the expanding market for chemicals related to water quality and quantity management and Kemira’s strong know-how in this field. Increasing water shortage, tightening legislation and customers’ needs to increase operational efficiency create opportunities for Kemira to develop new water applications for both current and new customers. Investment in research and development is a central part of Kemira’s strategy. The focus of Kemira’s research and development activities is on the development and commercialization of new innovative technologies for Kemira’s customers in all relevant markets.

We want to further strengthen our position in the paper industry, including packaging & board and tissue. The plan is to continue our solid performance in mature markets, embark on growth in China and to further develop our business in pulp in South America. In Oil & Mining we will continue to win new business in mature markets and strengthen our position in the mining industry in Africa. We want to make 2013 the year of growth.

To conclude, I would like to first of all thank our employees for their diligent work in enabling the change we embarked on in 2012. This contribution is needed also in 2013 to make the implementation a success. I also want to thank our other stakeholders for their trust and commitment in Kemira.