Municipal & Industrial review
In 2012 Municipal & Industrial´s operative EBIT margin was at 6.2% and the main focus was to improve the profitability through optimization of the manufacturing network, streamlining of the organization as well as improving the efficiency through customer segmentation. The segment continues to build on its good and solid supply position in flocculants and inorganic coagulants through selected investments, such as site construction in Spain and Germany.
In 2012, the segment focused on profitability improvements. Operations streamlining, cost cutting and growth-focused R&D activities were all geared towards a profitability turnaround.
Applications for niches offer globally significant markets
The segment committed further effort to the commercialization of the key R&D programs. During 2012, applications for membrane technologies, biogas, fermentation, and bioethanol processes have been developed and shown good progress in terms of commercialization. As an example M&I has launched KemGuard antiscalant product portfolio for membrane applications and Biogas Digestion Product (BDP) concept for industrial biogas plants. All R&D programs share one crucial property: they are niche-like applications which, when viewed globally, represent a substantial potential business volume.
The segment also initiated product development to further increase product line differentiation especially in the polymer product line. New polymer products will be launched during 2013.
The raw and wastewater applications continue to be the core for both municipal and industrial customers; water treatment is a stable business with a sustainable long-term outlook. The general demand continues to grow as a result of basic need for water combined with stricter regulations within the water sector. Phosphorus removal requirements for municipal waste water discharges are the major driver for chemical demand increase.
Streamlining and focus on key sites
The Fit for Growth restructuring program was started out in the segment and includes reorganizations on the one hand, and rationalization of the manufacturing footprint on the other. Reorganization comprises simplifying and streamlining the structure and empowerment of the regional business organizations.
Rationalization of the manufacturing footprint comprises consolidation of the manufacturing network and selected investments to increase competitiveness. Kemira has over 40 coagulant plants, of which over 20% has been decided to be closed or under review (for closure), while focusing the development activities to long-term key sites. The aim is to minimize manufacturing and logistic costs through footprint optimization. Furthermore, these selected investments will reinforce its strong coagulant position.
Development in key markets
In Asia Pacific, Municipal & Industrial increased resources, especially in China, and is localizing the product sourcing to be able to capture the growth in the emerging markets. The segment has chosen Asia Pacific as the region to go deeper especially into the fast growing area of new water treatment technologies, such as membranes. Kemira’s forthcoming production plant in Nanjing, China can be used to help leverage this upon its opening in 2013. The segment is planning to grow by renewing its product line, increasing the exposure and product offering relevant for the new water treatment technologies especially in the mature markets.
Sustainability in practice
Municipal & Industrial’s chemistry is focused on enhancing energy efficiency of its customers’ technologies and processes. In Europe, where energy prices are constantly increasing, it makes sense for municipal customers to extract the energy from sludge. Biogas R&D project is exactly targeting to serve in this customer need. Offering for membrane applications also heads to energy efficiency improvement. In bioethanol and fermentation projects the main driver is yield enhancement of the final product.
Byproduct utilization (typically another industry’s waste stream) in Kemira’s basic inorganic coagulant production amply demonstrates Municipal & Industrial’s dedication to sustainable treatment of raw materials, as do R&D initiatives to develop new products from natural biodegradable raw material sources. In the coagulant production, 60% of the raw material used stems from byproducts. Kemira Performic Acid (PFA) is yet another good illustration: a biodegradable disinfection solution for wastewater, water or sludge, resulting in byproducts of only carbon dioxide and water.
Next steps for the segment
In 2013, Municipal & Industrial will continue to simplify and streamline its structure, as well as develop its sales channels and distribution partnerships in order to better reach customers with smaller consumption needs. Also, the segment will focus on profitability improvements and accelerate the application based renewal of product offerings.