In 2012, Kemira’s clear strategic priority was to define the path to profitable growth, and hence the company launched the restructuring program Fit for Growth. In parallel, Kemira started to work on sharpening its strategy. This work is now underway and Kemira will communicate the sharpened strategy at the end of April.
Out of the overall water market of EUR 500 billion, Kemira participates in the water quality and quantity management (WQQM) market, which was worth EUR 166 billion in 2011. The accessible market with the current Kemira portfolio was EUR 26 billion. This market includes chemicals and services for paper, oil and gas as well as mining customers for improvement of their water, energy and raw material efficiency, and for other industrial and municipal customers for water treatment. Kemira has an 8.5% share of the accessible market in 2011. The annual growth of the target market is expected to be at 3.3% (CAGR 2011–2020).
Around 40% of Kemira’s portfolio is WQQM process chemicals, used to improve the process stability and yield in the customers’ production processes. Roughly another 40% of Kemira’s portfolio is chemicals for treatment of raw and wastewater, as well as sludge. The remaining 20% of Kemira’s portfolio is not related to WQQM.
The key strengths of Kemira within the accessible market are the following:
- Leading global supplier to the paper industry with long-term commitment.
- Capability to tailor products and applications to customers’ needs based on innovation and profound manufacturing capabilities.
- Strong innovation platform.
- High quality products and reliability in supply.
Kemira has divided its business into four segments: Paper, Oil & Mining, Municipal & Industrial and Chemsolutions. The segments have a clearly defined role in Kemira’s portfolio, on which the segment specific strategies are being developed.
- Paper: Strong position and product portfolio; potential to drive growth in South America via Pulp and in Asia Pacific via Paper chemicals, and to improve profitability by participating in the market consolidation in EMEA and NAFTA.
- Municipal & Industrial: Strong position in standard water treatment chemicals in Europe and in NAFTA. Growth and long-term sustainable position in emerging markets require investments in significant portfolio renewal.
- Oil & Mining: Strong profitable growth in mature markets and fast penetration into additional geographical areas (South America, Middle East and Africa and Asia Pacific), and into complementary chemical products.
- ChemSolutions: Profitability improvement through product mix optimization. Option to further drive efficiency and value creation through highly streamlined formic acid driven business model.
The following statements summarize Kemira’s positioning for the main growth opportunities in the coming years:
- Paper and pulp markets are consolidated and will likely consolidate further. Kemira has a strong market position and is committed to this business.
- Kemira has the capability to further increase its market share in the growing oil and gas market.
- Kemira is determined to grow above market average by focusing on fast growing regional sub-segments, especially in the emerging markets.
Strategic priorities in 2012
In 2012, Kemira’s number one priority was to define the path for profitable growth. To achieve this, three strategic priorities were established:
- Improve efficiency through a streamlined organization.
- Substantially grow and strengthen position in the emerging markets
- Further sharpen the strategy, with increased focus on water quality and quantity management.
Based on these, Kemira aims to simplify its operations, reach above 10% operative EBIT by 2014, and achieve a growth rate above the market average.
The first two of the above priorities are being addressed through the Fit for Growth program, which Kemira launched in Q3, 2012. The last priority is being addressed through the strategy development process, which aims at strategy approval in Q1, 2013. The sharpened strategy will be communicated in April 2013.
Fit for Growth
In 2012, Kemira Oyj started to implement its global restructuring program Fit for Growth, including decisions on additional site closures and headcount reductions in Europe and the US. Headcount reductions will impact up to 600 employees equaling approximately 12% of the total workforce of Kemira. Personnel redundancies will account for 50% of the expected savings, and the remaining 50% will be achieved through manufacturing network consolidation and leaner operations. Kemira has made the decision to close 7 manufacturing sites equaling over 20% of it’s global manufacturing operations. Additionally 7 other sites are under review (for closure) as part of the ongoing manufacturing consolidation.
As an added measure of Fit for Growth, Kemira’s aim is, through leaner operation, to improve net working capital ratio to 11% in 2014. Launched at the end of July, 2012, program’s overall purpose is to improve the company's profitability, its internal efficiency and to accelerate the growth in emerging markets without sacrificing business opportunities in the mature markets. The ultimate goal of the program is to reach at least a 10% EBIT margin in 2014. The cost savings target with the planned program is EUR 60 million on an annualized basis until the end of 2014. In 2012, the cost savings impact of Fit for Growth was EUR 10 million.