2009-02-25 07:00:00 CET
2009-02-25 12:31:29 CET
REGULATED INFORMATION
Kemira Oyj - Financial Statement Release
Kemira Oyj's Financial Statements Bulletin 2008
Kemira Oyj - Annual Financial Report
Kemira Oyj's Financial Statements Bulletin 2008
Kemira Oyj
Stock Exchange Release
February 25, 2009 at 9.00 am (CET+1)
2008 Was a Year of Strategic Changes for Kemira
In 2008:
* Revenue in 2008: EUR 2,832.7 million (2007: EUR 2,810.2
million).
* Operating profit excluding non-recurring items: EUR 132.6
million (EUR 174.6 million).
* Free cash flow after investments increased.
* Earnings per share: EUR -0.02 (EUR 0.53). Earnings per
share excluding non-recurring items: EUR 0.29 (EUR 0.75).
* Board proposes a dividend of EUR 0.25 per share (EUR
0.50).
In October-December 2008:
* Revenue in continuing business operations increased by 5%
in October-December 2008.
* Operating profit excluding non-recurring items increased
clearly and was EUR 11.7 million (EUR 4.1 million). Operating
profit rose as a result of sales price increases as well as
operational efficiency enhancement measures.
* Due to Kemira's restructuring and cost savings program,
Kemira booked EUR 79.8 million one-time costs for October-December
2008. The main part of the non-recurring costs involve production
capacity cuts, business closures and the discontinuance of
non-profitable business, and the measures underlying the costs will
improve Kemira's profitability in the near future.
Key Figures and Ratios
EUR million 10-12/2008 10-12/2007 1-12/2008 1-12/2007
Revenue 627.6 654.4 2,832.7 2,810.2
EBITDA 2.1 31.4 243.3 316.9
EBITDA, % 0.3 4.8 8.6 11.3
Operating profit, excluding 11.7 4.1 132.6 174.6
non-recurring items
Operating profit -68.1 -42.9 74.0 143.1
Operating profit, excluding
non-recurring items, % 1.9 0.6 4.7 6.2
Operating profit, % -10.9 -6.6 2.6 5.1
Financial income and -23.7 -15.3 -69.5 -51.9
expenses
Profit before tax -94.5 -58.0 1.8 93.3
Profit before tax, % -15.1 -8.8 0.1 3.3
Net profit -68.5 -46.0 1.8 67.5
EPS, EUR -0.57 -0.39 -0.02 0.53
Capital employed* 2,062.8 2,035.8 2,062.8 2,035.8
ROCE, %* 3.5 7.1 3.5 7.1
Free cash flow after
investments -63.0 -25.7 2.7 -149.1
Personnel at period-end 9,405 10,007 9,405 10,007
* 12-month rolling average
Kemira's President and CEO Harri Kerminen:"Kemira went through some major
changes in 2008. In June, we
announced our new, water-focused strategy and changed our
organization to enable the implementation of the strategy. At the
same time, we started a global savings program.
In the first half of the year, raw material prices rose steeply and
Kemira responded to this by implementing global sales price
increases, but in spite of this, the first half was weak both in
terms of earnings and sales. Price increases started to deliver
results in the third quarter, and as a whole, things took a positive
turn the third quarter.
Positive development continued into the final quarter, which in
continuing businesses outperformed the reference period both in terms
of sales and operating profit excluding non-recurring items.
Operating profit rose as a result of sales price increases as well as
other operational efficiency enhancement measures. However, at the
year-end, demand in the market weakened, affecting Kemira's sales,
particularly in the paints and coatings business as new construction
declined, as well as in paper chemicals. Despite the challenging
market situation, Kemira's revenue growth in continuing businesses
was 5% in the October-December period compared to the same period in
2007. Demand for municipal water treatment products remained good.
The ChemSolutions business enjoyed sustained strong demand for
chemicals used in the food, feed and pharmaceutical industries.
Due to Kemira's restructuring and the cost savings program launched
in June, Kemira booked EUR 79.8 million in one-time costs for the
last quarter of 2008. We can say in hindsight that we started the
cost savings program at the right time. Our measures underlying the
one-time items will improve our profitability in the near future.
When we announced the new strategy, we also unveiled plans to list
the paints and coatings business, i.e. Tikkurila, on the Helsinki
stock exchange during the first half of 2009. As the equity, debt and
paint markets have weakened, we have decided to postpone the listing
and target to arrange it once market conditions permit.
According to Kemira's targets, we are focusing on improving
profitability and reinforcing the cash flow and balance sheet. In
2008, we turned free cash flow after investments positive.
Strengthening the balance sheet will form one of our main focus areas
in 2009. Our goal is to make Kemira a leading water chemicals company
with better profitability, despite the challenging business
environment."
Financial Performance for October-December
Kemira Group's revenue in continuing business operations in
October-December 2008 increased by 5%. In the revenue for continuing
businesses, the impact of the titanium dioxide business that was
transferred to a joint venture as well as the impact of divested
businesses are excluded.
Kemira Group's reported revenue for October-December 2008 fell by
4%, totaling EUR 627.6 million (October-December 2007: EUR 654.4
million). Demand for paints and coatings shrank significantly in the
extremely unstable market conditions, as new construction declined.
In pulp and paper chemicals, sales shrank towards the end of the year
as demand in the customer industry weakened. Demand for products in
the municipal water treatment business continued to be good. Towards
the year-end, there were signs of weakening demand in the industrial
water treatment business. The ChemSolutions business enjoyed
sustained strong demand for chemicals used in the food, feed and
pharmaceutical industries. Sales price hikes increased revenue by
some EUR 48 million but a decline in sales volumes decreased revenue
by some EUR 48 million. Acquisitions contributed about EUR 9 million
to revenue growth while divestments decreased revenue by some EUR 59
million. The currency exchange effect had an approximately EUR 6
million positive impact on revenue.
Revenue by business area,
EUR million 10-12/2008 10-12/2007 1-12/2008 1-12/2007
Kemira Pulp&Paper 258.3 253.6 1,057.7 1,043.0
Kemira Water 190.6 180.3 760.0 686.4
Kemira Specialty 63.7 102.0 375.3 425.9
Kemira Coatings 103.5 118.4 648.1 625.2
Other, including 11.5 0.1 -8.4 29.7
eliminations
Total 627.6 654.4 2,832.7 2,810.2
Kemira Group's operating profit for the fourth quarter, excluding
non-recurring items, was EUR 11.7 million (EUR 4.1 million), and
operating profit as a percentage of revenue, excluding non-recurring
items, was 1.9% (0.6). Operating profit rose as a result of sales
price increases as well as operational efficiency enhancement
measures. On the other hand, raw material and energy prices as well
as transport costs were on a high level, which had a negative effect
on operating profit. Variable costs increased in October-December of
2008 by some EUR 40 million compared with the 2007 reference period
(excluding the effect of acquisitions, divestments and changes in
sales volumes). Sales price hikes increased operating profit by some
EUR 48 million. The decline in sales volumes decreased operating
profit by some EUR 17 million. The currency exchange effect increased
operating profit by approximately EUR 2 million.
Operating profit (excluding
non-recurring items), EUR 10-12/2008 10-12/2007 1-12/2008 1-12/2007
million
Kemira Pulp&Paper 9.4 12.3 50.4 79.8
Kemira Water 7.4 6.9 28.7 46.7
Kemira Specialty 11.4 -2.0 23.9 24.1
Kemira Coatings -12.6 -3.5 59.2 64.3
Other, including -3.9 -9.6 -29.6 -40.3
eliminations
Total 11.7 4.1 132.6 174.6
+-------------------------------------------------------------------+
| Operating | Kemira | Kemira | Kemira | Kemira | Kemira |
| profit, EUR | Group | Pulp&Paper | Water | Specialty | Coatings |
| million | | | | | |
| Analysis of | | | | | |
| the | | | | | |
| differences | | | | | |
|-------------+--------+------------+--------+-----------+----------|
| Operating | -42.9 | -1.8 | 3.8 | -13.9 | -5.9 |
| profit, | | | | | |
| 10-12/2007 | | | | | |
|-------------+--------+------------+--------+-----------+----------|
| Price | 48 | 13 | 22 | 11 | 2 |
|-------------+--------+------------+--------+-----------+----------|
| Volume | -17 | -4 | -7 | 1 | -7 |
|-------------+--------+------------+--------+-----------+----------|
| Currency | 2 | 1 | 0 | 1 | 0 |
| exchange | | | | | |
|-------------+--------+------------+--------+-----------+----------|
| Variable | -40 | -15 | -17 | -2 | -6 |
| costs | | | | | |
|-------------+--------+------------+--------+-----------+----------|
| Other | -18 | -31 | -15 | 13 | 4 |
|-------------+--------+------------+--------+-----------+----------|
| Operating | -68.1 | -38.0 | -12.7 | 9.8 | -12.6 |
| profit, | | | | | |
| 10-12/2008 | | | | | |
+-------------------------------------------------------------------+
Operating loss for October-December was EUR -68.1 million (EUR -42.9
million) including non-recurring items with a net impact of EUR -79.8
million (EUR -47.0 million) due to Kemira's restructuring and cost
savings program launched in June. Of the non-recurring items, less
than half will have a cash impact during 2008 and 2009. Approximately
61% of the non-recurring costs involve production capacity cuts,
business closures and the discontinuance of non-profitable business.
Kemira has already closed, and will continue to close, non-profitable
production capacity, particularly in its polymer and paper chemicals
business. The costs associated with personnel reductions and
organizational restructuring account for about 28% of the
non-recurring items. Functions will be centralized in order to cut
costs, the related items representing about 11% of the non-recurring
items.
The Group's net financial expenses in October-December totaled
EUR 23.7 million (EUR 15.3 million). This increase can be attributed
to the Group's higher interest expenses and the EUR 6.3 million (EUR
-0.3 million) mostly unrealized currency exchange losses recognized
in financial expenses.
Loss before tax in the fourth quarter came to EUR -94.5 million (EUR
-58.0 million) and full-year loss totaled EUR -68.5 million (EUR
-46.0 million). Earnings per share were EUR -0.57 (EUR -0.39).
Earnings per share excluding non-recurring items were EUR -0.08 (EUR
-0.04).
Business Areas in October-December
Kemira Pulp&Paper:
Kemira Pulp&Paper's revenue in October-December 2008 rose by 2% to
EUR 258.3 million (EUR 253.6 million). Sales declined towards the
year-end as demand in the customer industry dwindled. Divestments
decreased revenue by some EUR 2 million. The currency exchange effect
had a positive impact of approximately EUR 6 million on revenue.
Operating profit for October-December, excluding non-recurring items,
was EUR 9.4 million (EUR 12.3 million). The decrease in operating
profit was due to lower sales volumes of paper and pulp chemicals as
well as the high prices of raw materials, freight costs and energy.
Variable costs increased in October-December 2008 by about EUR 15
million compared with the same period in 2007. Raw material price
hikes had a particularly strong impact on the profitability of the
paper chemicals business. Sales price increases had an effect of
approximately EUR 13 million on operating profit. Impairments and
cost reserves of EUR 47.4 million (EUR 14.1 million) were recorded in
October-December related to the global cost savings program and
restructuring. Reported operating loss was EUR -38.0 million (EUR
-1.8 million).
Kemira Water:
Kemira Water's revenue in October-December 2008 rose by 6% to EUR
190.6 million (EUR 180.3 million). The revenue increase can be
attributed to the price hikes enforced due to higher raw material
prices. Demand for products in the municipal water treatment business
continued to be good. In the industrial water treatment business
there were signs of weakening demand towards the year-end. As a
whole, year-on-year delivery volumes in Kemira Water shrank. The
currency exchange effect had a positive impact on revenue of around
EUR 2 million. Acquisitions contributed around EUR 9 million to
revenue growth.
Operating profit for October-December, excluding non-recurring items,
was EUR 7.4 million (EUR 6.9 million). Sales price increases raised
the operating profit by about EUR 22 million while lower sales
volumes decreased it by around EUR 7 million. Variable costs
increased in October-December 2008 by some EUR 17 million compared
with the same period in 2007. Acquisitions increased operating profit
by some EUR 2 million. Impairments and cost reserves of EUR 20.1
million (EUR 3.1 million) were recorded in October-December related
to the global cost savings program and restructuring. Reported
operating loss was EUR -12.7 million (EUR 3.8 million).
Kemira Specialty:
Kemira Specialty's October-December revenue decreased after the
titanium dioxide business was transferred to the joint venture that
launched operations in early September. Revenue totaled EUR 63.7
million (EUR 102.0 million). The start-up of the joint venture had a
negative impact of about EUR 53 million on revenue, since titanium
dioxide was no longer part of Kemira's revenue in October-December.
Revenue from continuing business operations rose by 28%.
Operating profit, excluding non-recurring items, in the final quarter
was EUR 11.4 million (EUR -2.0 million). The start-up of the joint
venture had a positive impact of around EUR 3 million on operating
profit, as the result of the JV has been reported under the operating
profit line since the beginning of September and due to the titanium
dioxide business being loss-making in October-December 2007. Demand
and price level for formic acid and organic salts remained healthy.
Sales price increases had an effect on operating profit of around EUR
11 million. Impairments and cost reserves of EUR 1.6 million (EUR
11.9 million) were recorded in October-December related to the global
cost savings program and restructuring. Reported operating profit was
EUR 9.8 million (EUR -13.9 million).
Kemira Coatings:
Kemira Coatings' revenue in October-December fell by 13% to EUR 103.5
million (EUR 118.4 million). This decline can be attributed to the
decline in new construction and sales of construction materials, as
well as a slowdown in property sales, resulting from the general
economic recession in all key markets. The currency exchange effect
had a negative impact on revenue of around EUR 2 million.
Operating loss for October-December was EUR -12.6 million (EUR -5.9
million, including EUR -2.4 million non-recurring items). Lower sales
volumes reduced operating profit by some EUR 7 million. Variable
costs increased by around EUR 6 million compared with the same period
in 2007. Sales price increases and product mix changes had an
approximately EUR 2 million effect on operating profit.
Financial Performance for 2008
Kemira Group's revenue for 2008 totaled EUR 2,832.7 million (2007:
EUR 2,810.2 million). Sales price hikes increased revenue by some EUR
153 million and larger sales volumes increased revenue by some EUR 11
million. Acquisitions contributed about EUR 38 million to revenue
growth while divestments decreased revenue by some EUR 130 million.
The currency exchange effect had a negative impact on revenue of some
EUR 63 million. Organic revenue growth excluding acquisitions and
divestments in local currencies was 6%.
Revenue by market area was as follows: Europe 67% (67), North America
22% (23), South America 6% (4), Asia 4% (5), and Others 1% (1).
Operating profit for 2008, excluding non-recurring items, was EUR
132.6 million (EUR 174.6 million). This decrease was due to the
significantly higher prices of raw materials and energy. Variable
costs rose by some EUR 177 million in 2008 (excluding the effect of
acquisitions, divestments and changes in sales volumes). Sales price
hikes increased operating profit by about EUR 153 million in 2008 and
larger sales volumes by some EUR 2 million. The currency exchange
effect decreased operating profit by approximately EUR 8 million.
Acquisitions contributed approximately EUR 1 million to the operating
profit while divestments decreased revenue by EUR 1 million.
Operating profit as a percentage of revenue, excluding non-recurring
items, decreased from 6.2% to 4.7%.
Operating profit for 2008 was EUR 74.0 million (EUR 143.1 million),
including non-recurring items with a net impact of EUR -58.6 million
(EUR -31.5 million). In June, Kemira launched a global cost savings
program, targeting more than EUR 50 million savings per annum, and in
December Kemira announced it had identified further savings potential
that will lead to additional annual savings of EUR 10 million. These
savings should be realized during 2009 and 2010. Due to the cost
savings program, Kemira booked EUR 79.8 million one-time costs for
the last quarter of 2008. In January 2009, Kemira's paints and
coatings business launched its own savings program targeting savings
worth EUR 25 million in 2009-2010.
Profit before tax came to EUR 1.8 million (93.3) and net profit
totaled EUR 1.8 million (67.5). Earnings per share were EUR -0.02
(EUR 0.53). Earnings per share excluding non-recurring items were EUR
0.29 (EUR 0.75).
Taxes for the year came to EUR 0 million (EUR 25.8 million). The
taxes shown in the income statement are lower than those calculated
using the current tax rates due to the utilization of losses, and
because the profit includes non-taxable gains on assets sold. At the
same time, however, the impairments of fixed assets raised the
effective tax rate.
In the financial statements for 2007, Kemira estimated that the
company would continue to grow moderately in 2008. Full-year
operating profit and earnings per share, excluding non-recurring
items, were expected to improve. The company revised the forecast
during the year in connection with interim reports, following
unfavorable raw material and energy price developments and due to the
weak US dollar, among other factors.
The company's mid-term financial goals are:
- Organic growth of at least 5%
- Operating profit as a percentage of revenue totaling at
least 10%
- Positive cash flow after investments and dividends paid
- Return on capital employed (ROCE), %: Continuous
improvement
- Targeted gearing ratio 40-80%.
Financial Position and Cash Flows
The Group maintained a good financial position and liquidity
throughout the financial year.
In 2008, the Group reported cash flows of EUR 90.2 million (EUR 172.1
million) from operating activities. Net cash flow from investing
activities was EUR -87.5 million (EUR -321.2 million), of which
acquisitions accounted for an outflow of EUR -180.8 million (EUR
-66.6 million). Free cash flow after investments was EUR 2.7 million
(EUR -149.1 million), while the cash flow effect from expansion and
improvement investments was EUR -124.4 million (EUR -188.8 million).
Working capital accounted for 14.9% (15.2%) of revenue. Kemira Oyj
paid out EUR 60.6 million (EUR 58.2 million) in dividends to its
shareholders.
The Group's net debt at the end of the year stood at EUR 1,049.1
million (EUR 1,003.4 million). Foreign exchange changes increased the
net debt by some EUR 16 million, the dividend payment in the spring
2008 by some EUR 64 million, acquisitions by some EUR 40 million and
the weakened cash flows in the pulp and paper as well as paints and
coatings businesses, especially during the last quarter of the year,
by some EUR 46 million. The establishment of a joint venture with
Rockwood Holding Inc. in the titanium dioxide business at the end of
August improved the Group's cash flow by about EUR 96 million and
reduced the Group's net debt by about EUR 120 million, including the
amount reborrowed from the pension fund that was transferred into the
joint venture.
Interest-bearing liabilities stood at EUR 1,168.5 million (EUR
1,056.1 million). Fixed-rate loans accounted for 47% of total
interest-bearing loans, while the average interest rate on the
Group's interest-bearing liabilities was 5.6% (5.2%). The duration of
the Group's interest-bearing loan portfolio at the year-end was 17
months (December 31, 2007: 13 months).
The unused amount of the EUR 750 million revolving credit facility
that falls due in 2012 was EUR 354.5 million at the year-end, and the
amount obtained from the commercial paper markets was EUR 116.2
million. On December 31, 2008, cash and cash equivalents totaled EUR
119.4 million. Under its current structure, the Group will have no
significant refinancing needs in 2009-2010, as the current loan
arrangements cover its financing needs.
At the year-end, the equity ratio stood at 34% (December 31, 2007:
39%) while gearing was 107% (December 31, 2007: 92%). Equity declined
due to changes in exchange rates of key currencies causing
translation differences (impact some EUR 74 million), and due to the
one-time costs announced in December (impact some EUR 60 million).
This affected both the equity ratio and gearing.
The Group's net financial expenses grew to EUR 69.5 million (51.9).
Exchange rate losses grew by EUR 9.4 million, the most significant
losses of this kind being due to the Ukrainian subsidiary's
USD-denominated loan (loss of EUR 3.1 million) and the Brazilian
subsidiary's loan arrangement (loss of EUR 3.1 million). In addition,
the higher debt level and higher market interest rates compared to
2007 contributed to these higher costs.
In March, Kemira and the Nordic Investment Bank (NIB) signed a
10-year bilateral credit agreement of USD 60 million. In June, Kemira
and the European Investment Bank (EIB) signed a 12-year bilateral
research and development loan agreement worth EUR 100 million. In
addition, in the final quarter the company made 10-year reborrowing
arrangements with Finnish pension insurance companies, amounting to
EUR 57 million.
The Group's most important exchange rate risk arises from exports
from Sweden into the euro area. At the year-end, the SEK-denominated
exchange rate risk had an equivalent value of EUR 31 million, with an
average of 88% of the risk being hedged. In addition, the company is
exposed to a USD risk when USD-denominated items are converted into
euro in the financial statements. With its current structure, the
Group will not be exposed to any significant USD denominated currency
risks. Furthermore, the Group is exposed to a risk in relation to its
annual exports from Finland to Russia of around EUR 10 million. When
RUB-denominated items are converted into euro, the 10% fall in the
value of the ruble reduces the Group's operating profit by around EUR
1.5 million.
Capital Expenditure
Gross capital expenditure in 2008, excluding acquisitions, amounted
to EUR 161.0 million (EUR 254.4 million). The largest investments
were the SAP enterprise resource planning system, EUR 18.7 million;
the expansion of a formic acid plant in Oulu, Finland, EUR 10.9
million; and a logistics and service center for Kemira Coatings near
Moscow, EUR 9.2 million. Expansion investments represented around 41%
of capital expenditure excluding acquisitions, improvement
investments around 36% and maintenance investments around 23%.
Group depreciation and impairment amounted to EUR 169.4 million (EUR
173.8 million) including non-recurring impairment of EUR 38.6 million
(EUR 37.9 million).
Cash flow from the sale of assets was EUR 254.3 million (EUR -0.2
million). Cash flow from acquisitions was EUR -180.8 million (EUR
-66.6 million). The figures include the formation of the titanium
dioxide joint venture, which began operating in September. The
Group's net capital expenditure totaled EUR 87.5 million (EUR 321.2
million).
Strategy Update
In June 2008 Kemira announced its new strategy, which states that
Kemira will concentrate on water and fiber related businesses. In the
first phase, the company is focusing on improving profitability and
reinforcing the cash flow and balance sheet. In the second phase,
Kemira will seek strong growth.
Kemira's new organization reflecting the strategy is as follows:
- Kemira's business is divided into three customer-oriented
segments with P/L responsibility. Water technology is the common
denominator for all segments. The Paper segment will focus on serving
customer segments in the pulp and paper industry, while the Water
segment will concentrate on the customer segments in municipal and
industrial water treatment. The Oil & Mining segment will further
develop businesses in the expanding application areas of the oil, gas
and mining industries.
- Kemira is divided into four geographical areas: North
America, South America, Asia Pacific (APAC) and Europe (EMEA). These
areas are responsible for developing a common cost-effective
infrastructure for the different business functions. In addition, the
geographical organizations of South America and Asia Pacific are
responsible for strategy implementation and market development.
- The functions will be organized globally, and will provide
services for all Kemira businesses.
The new organization is effective as of October 1, 2008. The
objective is to secure profitability improvement and growth by
focusing on business development in the most profitable customer
segments and applications, based on Kemira's existing competences and
resources. Kemira will begin financial reporting according to the new
structure from the beginning of 2009. The structural change
essentially involves creating global shared practices and business
processes.
When Kemira announced its strategy, it also unveiled plans to
separate its Coatings business, i.e. Tikkurila, from Kemira and list
it on the NASDAQ OMX Helsinki Ltd during the first half of 2009. With
this listing, Kemira pursues an increase in overall shareholder value
and focuses Kemira's business around water. As the equity, debt and
paint markets have weakened, Kemira has decided to postpone the
listing. The listing is targeted to take place once market conditions
permit.
The Kemira Specialty business area was reorganized. A joint venture
with Rockwood Holdings Inc. began operating at the beginning of
September, combining Kemira's and Rockwood's titanium dioxide
business and Rockwood's functional additives business. Kemira will
continue to develop the ChemSolutions business as a separate entity,
thereby ensuring its profitability and maximum cash flow. The sodium
percarbonate business was included in the Paper business.
Together with the announcement of the new strategy, Kemira announced
a cost savings program with an annual savings target of over EUR 50
million, excluding Kemira Coatings. Savings are expected to be
realized in the course of 2009-2010. In December, Kemira announced
that it had identified further savings potential worth EUR 10 million
for these years. Kemira recorded non-recurring costs of EUR 79.8
million for the final quarter of 2008, associated with the savings
program. Group-wide savings measures include changing the group
structure, organization, and operating models. The planned savings
program may also lead to a reduction of approximately 1,000 persons
worldwide from Kemira's payroll, including the potential sale of
businesses. Streamlining of the global functions may lead, for
example, to the consolidation of production sites, R&D facilities and
the warehouse network. Kemira's co-determination negotiations held in
five business locations in Finland were concluded on October 8,
2008.The organizational change and savings program will result in a
net reduction of 298 persons in Finland.
In January, Kemira's paints and coatings business set its own savings
target of EUR 25 million for 2009-2010.
Short-Term Risks and Uncertainties
Kemira's short-term risks and uncertainty factors are related to
general economic developments and their effect on demand for Kemira's
products, particularly pulp and paper chemicals and paints and
coatings.
Powerful fluctuations in the world market prices of electricity and
oil are reflected in Kemira's financial results, via raw material
prices.
Changes in the exchange rates of key currencies can affect Kemira's
financials.
A detailed account of Kemira's risk management principles and
organization is available at the company website at www.kemira.com.
An account of financial risks will be available in the Notes to the
Financial Statements 2008. Materialized environmental and hazard
risks will be handled in Kemira's environmental report, to be
published in March.
Research and Development
Research and development expenditure totaled EUR 71.1 million (EUR
65.9 million), accounting for 3% (2%) of revenue. At the year-end,
the number of personnel working in 10 countries totaled 520, with 62%
of personnel working in Finland.
The objective of research and development is to support Kemira's
growth, enhance the customers' production processes and improve the
quality of final products. All of Kemira's customer segments have
water treatment in common, particularly water-related environmental
regulations and the need to use water efficiently. To support basic
components such as organic coagulants and flocculent polymers, Kemira
is strengthening its competence and product selection, especially in
water technology solutions. This will provide customers with even
more comprehensive solutions for both internal water cycle management
and waste water treatment. Kemira has also taken an active role in
the development of solutions that help reduce the load on the
environment. Product development projects also focus on partial
solutions such as waste water disinfection, odor control and water
friction for reducing polymers in oil recovery. At the same time,
efforts are made to develop waste water sludge processing as well as
methods to enhance biogas generation.
During the year, Kemira made a decision to consolidate its previous
17 R&D sites into 5 global facilities. These centers serve its
clientele in North America, Northern Europe, Continental Europe and
Asia. A fifth center will be established in South America in 2010.
The new R&D infrastructure will be strategically focused on enhancing
development and the commercialization of innovative technologies and
products for Kemira's customers locally and globally, meeting the
needs of the pulp and paper, drinking and waste water treatment and
oil and mining industries.
As part of the R&D structural reorganization, Kemira decided to
establish a new research and development center in Atlanta, Georgia,
in the United States. This center will be located at a technology
enterprise park in association with the Georgia Institute of
Technology (Georgia Tech) in Atlanta, and will house all of Kemira's
North American R&D activities. The new center will start up in the
summer of 2009. Kemira's Asian technology center in Shanghai, China,
was inaugurated in April.
In June, Kemira Oyj and the European Investment Bank (EIB) signed a
EUR 100 million 12-year research and development loan agreement. EIB
granted the loan to support the research, development and innovation
activities of Kemira Group during the years 2008-2011.
Environment and Safety
The bulk of Kemira's business is in the chemical industry, whose
products and operations are governed by numerous international
agreements and regional and national legislation all over the world.
In its financial statements, the Group treats its environmental
liabilities and risks in accordance with IFRS. The Kemira Code of
Conduct contains up-to-date environmental and health and safety
guidelines, compliance with law setting the minimum requirement. No
significant non-compliance conditions with respect to environmental
and safety permits have been brought to the management's attention.
In 2008, capital expenditure on environmental protection at company
sites totaled EUR 7.2 million (EUR 30.2 million) and operating costs
EUR 30.0 million (EUR 39.1 million). The change was mainly due to
transferring the titanium dioxide business to a joint venture that
began operating in early September. No major environmental projects
were in progress or being planned.
Provisions for environmental remediation measures of EUR 19.4 million
(EUR 13.6 million) were mainly related to landfill closures and
remediation projects for contaminated soil. The increase in
provisions was primarily related to the division of responsibilities
agreed between the parties in connection with the above mentioned
titanium dioxide joint venture arrangement regarding the closed
dumping areas and the launch of a remediation project at the Pori
site in Finland. Other realized acquisitions and divestments did not
alter the Group's overall environmental liabilities significantly. No
environmental liability cases related to previous operations, which
would have any significant effect on Kemira's financial position,
have been brought to the management's attention.
The implementation of the new EU chemicals regulation (REACH)
progressed as planned. The so-called preregistration required by the
regulation was completed. Kemira made around 3,000 preregistrations
for just over 400 imported and/or manufactured substances. None of
the substances which are candidates for authorization are used in
Kemira's products. The implementation of REACH is not expected to
have any major effects on the Group's competitiveness.
The frequency of occupational accidents decreased significantly from
the previous year, to 4.4 accidents per million working hours (6.5),
which is the best result the Group has achieved thus far. There were
no significant environmental or personal accidents in 2008.
The Group's environmental and safety organization was revised as part
of the overall structural overhaul. Group-wide and regional
objectives were set for the certified management systems extension
and continuous business improvement.
'
Kemira publishes an annual Environmental Report verified by a third
party. The report is prepared in accordance with IFRS and the
guidelines issued by the European Chemical Industry Council (CEFIC).
For example, the report deals with emissions and effluents, waste,
environmental costs, safety and product safety as well as the use of
natural resources.
Human Resources
The number of Group employees totaled 9,405 at the year-end (December
31, 2007: 10,007). During the year, the average number of employees
was 9,954 (10,008). As part of the cost savings program, Kemira
reduced personnel, primarily in Finland, Sweden, the US, China,
Germany and France. Enhanced measures were taken to support those who
lost their jobs.
At the year-end, the number of employees in Finland was 2,137
(2,885), elsewhere in EMEA 4,940 (4,930), in North America 1,420
(1,483), in South America 425 (226), and in Asia Pacific 483 (483).
In Finland, the number of employees declined particularly due to the
formation of the titanium dioxide joint venture. Kemira Pulp&Paper
had an average of 2,378 employees (2,315 on average), Kemira Water
2,311 (2,189), Kemira Specialty 758 (1,066), Kemira Coatings 4,027
(3,883) and Group functions 500 (555) employees. Part-time personnel
represented 4% (4) of total personnel.
Total salaries and wages paid in 2008 were EUR 354.6 million (EUR
360.4 million). Kemira's reward system is based on performance, the
principles of internal fairness and external competitiveness.
Consistent job evaluation helps ensure compliance with these
principles. Evaluations were performed at the end of 2008 to ensure
compliance with the responsibilities defined for the new
organization. Basic pay is supplemented by performance-based bonus
schemes, which cover a large share of Group employees.
The annual Group-wide personnel survey offers an important channel
for personnel participation and serves as a valuable management tool.
Since the building of the new Kemira organization was still in
progress in 2008, the personnel survey was postponed until the
beginning of 2009.
The Kemira Code of Conduct specifies Group principles governing
equality. Accordingly, Kemira treats all people equally in
recruitment and provides equal working conditions irrespective of
race, gender, religious beliefs, political opinions and national and
social origin. Kemira aims to achieve equal numbers of applications
for vacancies by women and men, equal opportunities for competence
development and career progression, equal placement on various
organizational levels, equal pay for equal work and equality in other
employment terms and conditions. At the end of 2008, women
represented 29% (29%) of Kemira's employees and men 71% (71%).
Business Areas
Kemira Pulp&Paper
Kemira Pulp&Paper is the world's leading expert in pulp and paper
chemicals, its energy and cost-efficient solutions spanning the pulp
and paper industry's value chain from pulp to paper coating.
EUR million 2008 2007
Revenue 1,057.7 1,043.0
EBITDA 74.5 133.7
EBITDA, % 7.0 12.8
Operating profit, excluding non-recurring items 50.4 79.8
Operating profit 2.2 68.2
Operating profit, excluding non-recurring items, % 4.8 7.6
Operating profit, % 0.2 6.5
Capital employed* 824.2 833.6
ROCE, % 0.3 8.2
Capital expenditure, excluding acquisitions 40.6 78.4
Free cash flow after investments 32.4 -24.3
Personnel at period-end 2,349 2,351
* 12-month rolling average
Kemira Pulp&Paper's revenue in 2008 was EUR 1,057.7 million (EUR
1,043.0 million). Organic growth in local currencies was 5%.
Divestment decreased revenue by some EUR 10 million. The currency
exchange effect had a EUR 25 million negative impact on revenue. The
demand for pulp chemicals remained relatively healthy although it
fell slightly towards the year-end due to customers' production
downtime. The competitive environment for paper chemicals was
particularly challenging, with customers closing paper mills in
mature markets in Europe and North America.
Operating profit for 2008, excluding non-recurring items, was EUR
50.4 million (EUR 79.8 million). The profitability decline was
primarily due to increased raw material, energy and freight costs.
Variable costs increased by EUR 59 million compared with 2007. The
higher raw material costs had a particularly strong impact on the
profitability of paper chemicals. Implemented price increases did not
fully compensate for the impact of higher raw material prices and
energy costs. Sales price increases had a EUR 33 million effect on
operating profit.
Kemira Pulp&Paper's reported operating profit was EUR 2.2 million
(EUR 68.2 million), including non-recurring items with a net impact
of EUR -48.2 million (EUR -11.6 million). These non-recurring items
were mainly related to the Group's cost savings program and
restructuring measures, aimed at improving the profitability of
Kemira's pulp and paper chemicals business in the near future. In
recent years, Kemira has closed six production plants in North
America's mature paper chemical markets, and a seventh is to be shut
down during the year underway. Customer deliveries will be handled
from other US and Canadian units. In 2008, the decision was taken to
shut down the AKD wax production line in Vaasa, Finland, as part of
the efficiency-boosting measures implemented.
In January, Kemira set up a new company in Indonesia, a growing pulp
and paper production region. PT Kemira Indonesia offers paper and
pulp chemical products and solutions to its customers in Southeast
Asia.
In April, Kemira signed a two-year sulfuric acid delivery agreement
with Talvivaara Projekti Oy. Kemira's chemical deliveries to the
Talvivaara mine in Sotkamo, Finland, began in the final quarter of
2008. The mine will produce nickel, zinc and copper. Sulfuric acid is
used in the production process to regulate the acidity of the
bacterial solution that acts as a catalyst in the process for
dissolving metals.
On-site chlorine dioxide production, project-engineered by Kemira,
was launched at Celulosa Argentina's pulp mill in Capitan Bermudez in
early July, coinciding with the mill's switchover to chlorine-based
bleaching. Kemira supplies the chemicals needed for chlorine dioxide
production as well as hydrogen peroxide, and is actively involved in
the development of the mill's bleaching process.
In June, the European Commission imposed a fine of EUR 10.15 million
on Finnish Chemicals Oy for antitrust activity in the company's
sodium chlorate business during 1994-2000. Kemira Oyj acquired
Finnish Chemicals in 2005. The fine imposed by the Commission will
not affect Kemira's cash flow.
In July, Kemira agreed to deliver pulp and bleaching chemicals to
Mondi's production facilities located in Syktyvkar, Russia, for
2008-2010.
In January 2009 Kemira and the Chinese Tiancheng Ltd. set up a joint
venture Kemira-Tiancheng Chemicals (Yanzhou) Co., Ltd to produce AKD
wax and adhesives derived from the wax for the paper and board
industry. Kemira has a 51 per cent holding in the joint venture and
Tiancheng 49 per cent.
In January 2008, Jyrki Mäki-Kala was appointed President of the
Kemira Pulp&Paper business area as Harri Kerminen was appointed CEO
of the Kemira Group. Petri Helsky took over as President of
Pulp&Paper on October 1, 2008 after Jyrki Mäki-Kala was appointed
Kemira Group's CFO.
Kemira Water
Kemira Water is the world's leading expert in municipal and
industrial waste water as well as process and drinking water
treatment. Kemira Water offers services, products and equipment for
municipal and industrial water treatment.
EUR million 2008 2007
Revenue 760.0 686.4
EBITDA 53.9 78.8
EBITDA, % 7.1 11.5
Operating profit, excluding non-recurring items 28.7 46.7
Operating profit 10.9 43.6
Operating profit, excluding non-recurring items, % 3.8 6.8
Operating profit, % 1.4 6.4
Capital employed* 440.6 409.4
ROCE, % 2.5 10.9
Capital expenditure, excluding acquisitions 30.9 51.0
Free cash flow after investments -31.0 -65.8
Personnel at period-end 2,406 2,319
* 12-month rolling average
Kemira Water's revenue in 2008 rose by 11% to EUR 760.0 million (EUR
686.4 million). Revenue increased, largely thanks to price increases
implemented to compensate for higher raw material prices. However,
there were signs of weakening demand in the industrial water
treatment business towards the year-end. The currency exchange effect
had a negative impact on revenue of about a EUR 21 million.
Acquisitions contributed around EUR 31 million to sales growth.
Raw material prices and transportation costs were high and had a
negative impact on profitability, despite realized sales price
increases. Operating profit for 2008, excluding non-recurring items,
was EUR 28.7 million (EUR 46.7 million). Variable costs increased by
some EUR 76 million compared with 2007. Sales price increases raised
operating profit by about EUR 69 million while lower sales volumes
decreased it by approximately EUR 2 million. Acquisitions increased
operating profit by some EUR 2 million. Reported operating profit was
EUR 10.9 million (EUR 43.6 million), including non-recurring items
with a net impact of EUR -17.8 million (EUR -3.1 million).
Non-recurring items mainly relate to the Group's cost savings program
and restructuring measures, aimed at improving the profitability of
Kemira's water treatment chemicals business in the near future.
In April, Kemira announced its intentions to multiply its production
capacity in water treatment chemicals in Chongqing, central China, by
investing in a new production line for the manufacture of solid
polyaluminum chloride. In the highly challenging market conditions,
the decision was taken to cancel this investment.
In August, Kemira announced it was investigating ownership
alternatives for its subsidiary Galvatek Oy. The conclusion was to
sell the company later when the market conditions are favorable.
Galvatek specializes in the planning and supply of surface treatment
plants, industrial water treatment plants and maintenance services.
Galvatek reported revenue of around EUR 5.9 million in 2008.
In September, Kemira announced its intentions to acquire a water
treatment chemicals company operating in the Shandong Province of
China.
Kemira's acquisition of the Brazilian water treatment chemicals
company Nheel Química Ltda was confirmed in November. The acquisition
strengthened Kemira's presence in Latin America's biggest and fastest
growing water treatment market in Brazil. With this acquisition,
Kemira became the largest producer of iron and aluminum salts for
water treatment in Brazil. In 2008, Nheel Química's revenue was
approximately EUR 34 million.
Pekka Ojanpää was appointed President of Kemira Water business area
in February 2008 after Mats Jungar left the company.
Kemira Specialty
Kemira Specialty is the leading expert in specialty chemicals in
selected customer segments, serving customers in a wide array of
industries, such as the food and feed industries, through its
customer-driven solutions.
EUR million 2008 2007
Revenue 375.3 425.9
EBITDA 62.6 45.1
EBITDA, % 16.7 10.6
Operating profit, excluding non-recurring items 23.9 24.1
Operating profit 36.4 13.5
Operating profit, excluding non-recurring items, % 6.4 5.7
Operating profit, % 9.7 3.2
Capital employed* 401.1 435.3
ROCE, % 8.4 3.1
Capital expenditure, excluding acquisitions 35.2 55.0
Free cash flow after investments 68.8 -26.3
Personnel at period-end 325 1,028
* 12-month rolling average
In the beginning of September 2008, a titanium dioxide joint venture
between Kemira Oyj and Rockwood Holdings, Inc. began operating. This
joint venture combines Kemira's and Rockwood's titanium dioxide
business and Rockwood's functional additives business. The pro forma
revenue of the joint venture for 2007 is approximately EUR 560
million. The venture is 61 per cent owned by Rockwood and 39 per cent
owned by Kemira. Operating under the name Sachtleben, the new company
is the leading producer of specialty titanium dioxide pigments for
the synthetic fiber industry, specialty titanium dioxide pigments for
packaging inks and specialty titanium dioxide grades for the
cosmetics, pharmaceutical and food industries. Sachtleben is also the
world's largest producer of synthetic barium sulfate specialties and
holds a unique position in the field of zinc sulfide pigments. The
joint venture's competitive advantages include the fact that both
companies' titanium dioxide production is based on the same
production process, and both have strong capabilities in the
development of nanoparticles for specialty applications. Formation of
the joint venture is part of the implementation of Kemira's new
strategy.
In 2008, Kemira Specialty's revenue totaled EUR 375.3 million (EUR
425.9 million). Revenue decreased after the titanium dioxide business
was transferred to the joint venture that launched operations in
early September. The start-up of the joint venture had a negative
impact of some EUR 72 million on revenue, since titanium dioxide was
no longer part of Kemira's revenue in September-December. The
currency exchange effect had around a EUR 9 million negative impact
on revenue. Revenue from continuing business operations rose by 8%.
Kemira Specialty's operating profit in 2008, excluding non-recurring
items, was EUR 23.9 million (EUR 24.1 million). Variable costs
increased by some EUR 20 million compared with 2007, while sales
price increases had a positive effect on operating profit of around
EUR 22 million. The start-up of the joint venture had a EUR 1 million
positive impact on operating profit, as the result of the JV has been
reported under the operating profit line since the beginning of
September and due to the titanium dioxide business being loss-making
in September-December 2007. Demand and the price level for formic
acid and organic salts remained healthy. Operating profit from
continuing business operations rose by 38%. The currency exchange
effect decreased operating profit by some EUR 5 million. Reported
operating profit was EUR 36.4 million (EUR 13.5 million), including
non-recurring items with a net impact of EUR 12.5 million (EUR -10.6
million).
The expansion of Kemira's formic acid plant in Oulu, Finland, was
completed and the plant was brought on line in July. Kemira is the
world's second largest formic acid producer. This investment further
strengthens Kemira's market position and makes it better equipped to
respond to market needs.
Hannu Virolainen was appointed President of the Kemira Specialty
business area in February 2008, after Pekka Ojanpää was appointed
President of Kemira Water. In the new organization that entered into
force on October 1, 2008, Kemira Specialty's sodium percarbonate
business was included in the Paper segment. Kemira will continue to
develop the ChemSolutions business as a separate entity, thereby
ensuring its profitability and maximum cash flow.
Kemira Coatings
Kemira Coatings. i.e. Tikkurila, is the leading expert in painting
and coating solutions in Northern and Eastern Europe, providing
services and branded products to consumers, professionals and the
industry.
EUR million 2008 2007
Revenue 648.1 625.2
EBITDA 78.2 91.2
EBITDA, % 12.1 14.6
Operating profit, excluding non-recurring items 59.2 64.3
Operating profit 59.2 73.1
Operating profit, excluding non-recurring items, % 9.1 10.3
Operating profit, % 9.1 11.7
Capital employed* 323.6 311.0
ROCE, % 18.3 23.9
Capital expenditure, excluding acquisitions 32.1 43.5
Free cash flow after investments 29.5 20.7
Personnel at period-end 3,867 3,789
* 12-month rolling average
Kemira Coatings' revenue in 2008 picked up by 4%, to EUR 648.1
million (EUR 625.2 million). The Baltics saw a slowdown in new
construction as well as a decrease in the sales of construction
materials since the second quarter of the year. In the final quarter,
all key markets for Kemira's paints and coatings business experienced
a significant decrease in new construction and a slowdown in property
sales. The currency exchange effect had a negative impact on revenue
of around EUR 8 million. Acquisitions contributed around EUR 3
million to revenue growth.
Operating profit was EUR 59.2 million (EUR 64.3 million, excluding
non-recurring items). A decline in sales volumes had a negative
impact on operating profit of around EUR 2 million. Variable costs
increased by some EUR 22 million compared with 2007. Sales price
increases and product mix changes had an effect on operating profit
of around EUR 29 million. Acquisitions decreased operating profit by
some EUR 2 million.
In January, a newly constructed paint plant in Nykvarn near
Stockholm, Sweden, began operating. The operations of the old factory
in Stockholm were housed in the new facility.
Following its strategy, Kemira Coatings is strengthening its position
in the Southeast and East European paint markets. In the beginning of
July, a trading company by the name of Tikkurila JUB Romania
established jointly with the Slovenian paint company JUB launched
operations. The company is responsible for the marketing, sales and
the distribution of Kemira Coatings' and JUB's decorative paints in
Romania. In August, Kemira Coatings announced its intentions to
establish a sales company in Minsk to handle the marketing, sales and
distribution of Kemira Coatings' decorative paints and industrial
coatings in Belarus. Kemira Coatings has also decided on a relocation
and major expansion in the production of decorative paints in St
Petersburg, Russia. This expansion will significantly increase Kemira
Coatings' production volumes of waterborne paints and improve the
cost efficiency of production in Russia. During the beginning of
2009, a logistics and service center is expected to be completed in
Mytischi near Moscow. It will considerably improve Kemira Coatings'
customer service in Moscow and the nearby region. Both decorative
paints and industrial coatings businesses are housed in the center.
It will also offer facilities for extensive customer training
programs, which form an integral part of Kemira Coatings' marketing.
In December, Alcro-Beckers AB announced that it would acquire the
Färgglädje Måleributiken AB paint store located in Alvik in
Stockholm, Sweden. The store recorded revenue of about SEK 54 million
in 2008 (EUR 5.6 million) and employs a staff of approximately 20.
The paint store will become the Alcro brand's flagship store.
In December, Kemira's paints and coatings business strengthened its
position in Eastern Europe by acquiring the sales company Finncolor
Slovakia s.r.o. operating in Martin, Slovakia, from the company's
management. Finncolor Slovakia has acted as Tikkurila's importer for
decorative paints and industrial coatings in Slovakia.
Visa Pekkarinen, who was responsible for Kemira's paints and coatings
business, retired at the end of October 2008 after 20 years within
the company, of which eight years as the President of Tikkurila Oy.
Erkki Järvinen was appointed President and CEO of Tikkurila Oy
effective as of January 1, 2009. Järvinen was previously President
and CEO of Rautakirja Corporation, a Sanoma Oyj company.
In January 2009, Tikkurila announced the launch of a Group-wide
savings program in order to secure the future competitiveness of its
paints and coatings business. The company has set an annual savings
target of EUR 25 million and the cost savings program will involve
the entire personnel of the Tikkurila Group, totaling approximately
3,800 persons. The program may lead to a reduction of approximately
500 persons in total from the company's payroll, including all of
Tikkurila's operating countries. Co-determination negotiations began
at Tikkurila's Vantaa site in Finland in January. The negotiations
cover the entire workforce of 900 at the Vantaa site and may lead to
a reduction of 200 persons in Finland, including temporary personnel.
When Kemira announced its strategy, it also unveiled plans to
separate its Coatings business, i.e. Tikkurila, from Kemira and list
it on the NASDAQ OMX Helsinki Ltd during the first half of 2009. With
this listing, Kemira pursues an increase in overall shareholder value
and focuses Kemira's business around water. As the equity, debt and
paint markets have weakened, Kemira has decided to postpone the
listing. The listing is targeted to take place once market conditions
permit.
Other Operations
Other operations include corporate expenses not charged to the
business areas, such as some research and development costs and the
costs of the Kemira Corporate Center. As of January 1, 2009, other
operations will include the ChemSolutions business, which consists of
the production of organic acids and salts.
Kemira Oyj Shares and Shareholders
On December 31, 2008, Kemira Oyj had 21,333 registered shareholders
(December 31, 2007: 16,723).
Kemira Oyj's largest individual shareholder on December 31, 2008, was
Oras Invest Oy with a 16.6 per cent interest (December 31,
2007:16.6%). Solidium Oy, a fully state-owned enterprise, held 16.5
per cent of the shares (Finnish State held 16.5 per cent on December
31, 2007). Foreign shareholders held 12.8 per cent (18.4), including
nominee registered holdings. Other Finnish institutions owned 38.6
per cent (36.6 per cent) of the shares and households 12.4 per cent
(8.8 per cent). At the year-end, Kemira held 3,854,465 million
treasury shares (3,854,465), representing 3.1 per cent (3.1%) of all
outstanding company shares.
On December 11, 2008, the Finnish State transferred its 20,656,500
Kemira Oyj shares, representing 16.5 per cent of Kemira shares and
votes, to the fully state-owned enterprise Solidium Oy as a
contribution in kind referred to in the Limited Liability Companies
Act.
Kemira Oyj share closed at EUR 5.94 at the NASDAQ OMX Helsinki Ltd at
the end of 2008 (2007: EUR 14.40). Share price fell 59 per cent
during the year. Shares registered a high of EUR 14.77 (EUR 19.20)
and a low of EUR 5.42 (EUR 13.11) the share price averaging EUR 8.70
(EUR 16.42). The company's market capitalization, excluding treasury
shares, was EUR 719.9 million at the year-end (EUR 1,745.1 million).
In 2008, Kemira Oyj's share trading volume on the stock exchange
totaled 117.4 million (151.6 million) and was valued at EUR 1,028.4
million (EUR 2,492.9 million).
On December 31, 2008, the company's share capital totaled EUR 221.8
million and the number of registered shares was 125,045,000.
Board of Directors and Auditors
At the Annual General Meeting held on March 19, 2008, seven members
were elected to the Board of Directors. Elizabeth Armstrong, Juha
Laaksonen, Ove Mattsson, Pekka Paasikivi and Kaija Pehu-Lehtonen were
re-elected, while the new members were Jukka Viinanen and Jarmo
Väisänen. Pekka Paasikivi was re-elected Chairman and Jukka Viinanen
was elected Vice Chairman. The Board of Directors met 15 times during
2008.
Kemira Oyj's Board of Directors has set up three committees: Audit
Committee, Compensation Committee, and Nomination Committee. The
Audit Committee and the Compensation Committee are both made up of
members independent of the Company and elected by the Board of
Directors from amongst its members. Juha Laaksonen serves as the
Chairman of the Audit Committee and its members are Jarmo Väisänen
and Kaija Pehu-Lehtonen. During 2008, the Audit Committee met five
times. Pekka Paasikivi is the Chairman of the Compensation Committee
and its members are Jukka Viinanen and Ove Mattsson. In 2008, the
Compensation Committee met five times.
In December 2008, Kemira Oyj's Board of Directors assembled a
Nomination Committee to prepare a proposal for the Annual General
Meeting concerning the composition and remuneration of the Board of
Directors. The Nomination Committee consists of the representatives
of the three largest shareholders as of December 17, 2008 and the
Chairman of Kemira Oyj's Board of Directors as an expert member. Jari
Paasikivi, Managing Director of Oras Invest Oy, serves as the
Chairman of the Nomination Committee. Other members are Pekka Timonen
from the State of Finland's Ownership steering as representative of
Solidium Oy; Risto Murto, Chief Investment Officer, Varma Mutual
Pension Insurance Company; and Pekka Paasikivi, Chairman of Kemira's
Board of Directors as an expert member.
The AGM elected KPMG Oy Ab, Authorized Public Accountants, the
company's auditor, with Pekka Pajamo, Authorized Public Accountant,
acting as chief auditor.
AGM Decisions
Based on a decision by the Annual General Meeting on March 19, 2008,
the Group paid out a per-share dividend of EUR 0.50 on April 2, 2008,
totaling EUR 60.6 million.
A decision was made at the AGM to amend Article 4 of the current
Articles of Association such that references to the Finnish titles"pääjohtaja"
(English translation in the current Articles of
Association "Chief Executive Officer") and "varapääjohtaja" (English
translation in the current Articles of Association "Deputy Chief
Executive Officer") will be deleted.
The AGM authorized the Board of Directors to decide upon the
repurchase of a maximum of 2,397,515 treasury shares. Shares will be
repurchased by using unrestricted equity either through a direct
offer with equal terms to all shareholders at a price determined by
the Board of Directors, or otherwise than in proportion to the
existing shareholdings of the Company's shareholders in public
trading on the NASDQ OMX Helsinki Ltd ("Stock Exchange") at the
market price quoted at the time of the repurchase. Shares will be
acquired and paid for in accordance with the Rules of Stock Exchange
and the Finnish Central Securities Depository Ltd. Shares may be
repurchased for use in implementing or financing mergers and
acquisitions, developing the Company's capital structure, improving
the liquidity of the Company's shares or implementing the Company's
share-based incentive plan. For the purposes mentioned above, the
Company may retain, transfer or cancel the shares. The Board of
Directors will decide on other terms related to the share repurchase.
This authorization will remain valid until the end of the next Annual
General Meeting. The Board has not exercised the authorization.
Furthermore, the Annual General Meeting authorized the Board to
decide to issue a maximum of 12,500,000 new shares and to transfer a
maximum of 6,252,250 treasury shares held by the company. The new
shares may be issued and treasury shares held by the Company may be
transferred either against payment or, as part of the implementation
of the Company's share-based incentive plan, without payment. The new
shares may be issued and the treasury shares held by the Company may
be transferred to the Company's shareholders in proportion to their
current shareholdings in the Company, or through a private placement
if the Company has significant financial reasons for doing so, such
as financing or implementing mergers and acquisitions, developing its
capital structure, improving the liquidity of the Company's shares or
if the share issue is justified for the purpose of implementing the
Company's share-based incentive plan. The private placement may be
carried out without payment only in connection with the
implementation of the Company's share-based incentive plan.
Furthermore, the subscription price of the new shares shall be
recognized under unrestricted equity. The amount payable upon the
transfer of treasury shares shall be recognized under unrestricted
equity. The Board of Directors will decide on other terms related to
the share issues. Moreover, the authorization will remain valid until
the end of the next Annual General Meeting. The Board has not
exercised this authorization.
Kemira Management Appointments
Harri Kerminen, M.Sc. (Eng.), MBA, took over as the new President and
CEO of Kemira on January 1, 2008. Harri Kerminen's previous position
was President of Kemira Pulp&Paper. On the same date, Kemira's
previous President and CEO Lasse Kurkilahti assumed the position of
Senior Advisor to Kemira's Board of Directors. Mr. Kurkilahti
remained as Senior Adviser for the first quarter of 2008, after which
his contract as President and CEO ended in line with a prior
agreement.
Management Boards of Kemira as of October 1, 2008
The Operative Management Board of Kemira Oyj is responsible for the
operative steering of the businesses and consists of Harri Kerminen,
Esa Tirkkonen, Jyrki Mäki-Kala, Petri Helsky, Pekka Ojanpää and Randy
Owens.
The Strategic Management Board of Kemira Oyj is responsible for the
strategy implementation. As of October 1, 2008, the Strategic
Management Board consists of: Harri Kerminen (President and CEO),
Esa Tirkkonen (deputy CEO), Petri Helsky (Paper), Pekka Ojanpää
(Water), Randy Owens (Oil & Mining), Håkan Kylander (EMEA), Hannu
Melarti (North America), Hilton Casas (South America), Ronald Kwan
(Asia Pacific), Jyrki Mäki-Kala (CFO, IT), Petri Boman (Supply Chain
Management), Johan Grön (R&D, Technology), Jukka Hakkila (Legal, Risk
Management, Internal Audit), Päivi Jokinen (Marketing and
Communications) and Eeva Salonen (Human Resources). Timo Leppä was
the Executive Vice President, Group Communications, until January 31,
2009.
Changes in the Group Structure
Reflecting the new strategy announced in June, Kemira was reorganized
as follows:
- Kemira's business is divided into three customer-oriented
segments with P/L responsibility: Paper, Water and Oil & Mining.
- Kemira is divided into four geographical areas: North
America, South America, Asia Pacific (APAC) and Europe (EMEA).
- The functions will be organized globally, and will provide
services for all Kemira businesses.
The new organization is effective as of October 1, 2008. Kemira will
begin financial reporting according to the new structure from the
beginning of 2009.
Acquisitions and divestments carried out during the year are being
discussed under business sections.
Parent Company's Financial Performance
The parent company posted revenue of EUR 285.3 million (279.7) and an
operating profit of EUR 37.9 million (EUR -22.3 million). The parent
company bears the cost of Group management and administration as well
as a portion of research costs.
The parent company's net financial expenses came to EUR 16.9 million
(EUR 28.9 million). Operating profit totaled EUR 54.7 million (EUR
2.7 million). Capital expenditure totaled EUR 192.5 million (EUR 54.4
million), excluding investments in subsidiaries. The figure includes
the formation of the titanium dioxide joint venture.
Dividend Proposal
The Board of Directors will propose a per-share dividend of EUR 0.25
for 2008. Due to the negative net profit, the dividend payout ratio
is negative. The dividend payout ratio as a percentage of net income
excluding non-recurring items is 86%. For the financial year 2007,
Kemira paid out a dividend of EUR 0.50 per share. According to the
Board's proposal, the dividend record date is April 15, 2009, and the
payment date April 22, 2009. Kemira aims to distribute a dividend
that accounts for 40-60% of its operative net income.
Outlook
In 2009, Kemira will continue the efficiency-boosting work underway.
Its key focus areas in 2009 will be improving profitability and
reinforcing its cash flow and balance sheet.
The annual savings target of the announced global cost savings
program is over EUR 85 million, which should be achieved during
2009-2010. Kemira Coatings share of the savings target will amount to
EUR 25 million.
In many of Kemira's customer industries, the market situation is
challenging. General economic trends are generating big uncertainty
in customers' and Kemira's business operations. During the first
quarter of the year, Kemira's revenue is expected to fall due to
reduced demand amongst customer industries. During the same period,
operating profit excluding non-recurring items is expected to
decrease in Kemira Coatings, but rise in the rest of the Group due to
the efficiency-boosting measures.
Helsinki, February 24, 2009
Board of Directors
All forward-looking statements in this review are based on the
management's current expectations and beliefs about future events,
and actual results may differ materially from the expectations and
beliefs such statements contain.
For further information, please contact:
Kemira Oyj
Jyrki Mäki-Kala, CFO
Tel. +358 10 86 21589
Päivi Antola, Senior Manager, Investor Relations and Financial
Communications
Tel. +358 10 86 21140
Kemira will hold a press conference on its 2008 results for the media
and analysts at its head office (Porkkalankatu 3) today, starting at
10:00 am. The presentation material will be available on Kemira's
website at www.kemira.com.
Kemira's annual general meeting will be arranged on Wednesday, April
8, 2009 at 1:00 p.m. in the Marina Congress Center,
Katajanokanlaituri 6, Helsinki. Kemira Oyj will publish its interim
report for January-March 2009 on Wednesday May 6, 2009 at 9:00 a.m.
KEMIRA GROUP
The figures are unaudited.
All figures in this financial report have been rounded and
consequently the
sum of individual figures can deviate from the presented sum figure.
This Interim Consolidated Financial Statements has been prepared in
compliance
with IAS 34.
Changes to the accounting policies as of January 1, 2008:
- IFRIC 11 interpretation of IFRS 2 Group and Treasury Share
Transactions
- IFRIC 12 (Service Concession Arrangements) interpretation
related to service arrangements between public and
private sectors
- IFRIC 14 (IAS 19 - The Limit on a defined Benefit Asset,
Minimum Funding Requirement and their Interaction) interpretation
related to minimun funding requirements of defined benefit
arrangements
- Amendments of IAS 39 Financial Instruments: Recognition and
Measurement and IFRS 7 Financial Instruments: Disclosures -
Reclassification of Financial Assets (effective date July 1,
2008). These amendments apply to reclassification of certain
financial assets in certain exceptional situations.
The amendments of the standards and interpretations had no effect
on the consolidated financial statements
INCOME STATEMENT 10-12/ 10-12/
EUR million 2008 2007 2008 2007
Revenue 627.6 654.4 2,832.7 2,810.2
Other operating
income 11.6 26.7 51.5 45.9
Expenses -637.0 -649.7 -2,640.8 -2,539.2
Depreciation and
impairments -70.3 -74.3 -169.4 -173.8
Operating profit -68.1 -42.9 74.0 143.1
Financial income and
expenses, net -23.7 -15.3 -69.5 -51.9
Share of profit or loss of
associates -2.7 0.2 -2.7 2.1
Profit before tax -94.5 -58.0 1.8 93.3
Income tax 26.0 12.0 0.0 -25.8
Net profit for the period -68.5 -46.0 1.8 67.5
Attributable to:
Equity holders of the parent -68.6 -46.8 -1.8 63.7
Minority interest 0.1 0.8 3.6 3.8
Net profit for the period -68.5 -46.0 1.8 67.5
BALANCE SHEET
EUR million
31.12. 31.12.
ASSETS 2008 2007
Non-current assets
Goodwill 655.1 626.6
Other intangible assets 111.6 112.3
Property, plant and equipment 765.7 984.3
Holdings in associates 135.6 5.5
Available-for-sale investments 159.8 102.2
Deferred tax assets 12.7 5.2
Defined benefit pension receivables 54.0 34.6
Other investments 11.5 6.4
Total non-current assets 1,906.0 1,877.1
Current assets
Inventories 319.3 311.2
Receivables
Interest-bearing receivables 7.6 3.2
Interest-free receivables 507.4 548.1
Total receivables 515.0 551.3
Money market investments -
cash equivalents 87.1 21.4
Cash and cash equivalents 32.3 31.2
Total current assets 953.7 915.1
Non-current assets held for sale 0.0 35.7
Total assets 2,859.7 2,827.9
EQUITY AND LIABILITIES 31.12. 31.12.
2008 2007
Equity attributable to equity
holders of the parent 962.8 1,072.0
Minority interest 13.2 15.3
Total equity 976.0 1,087.3
Non-current liabilities
Interest-bearing non-current liabilities 609.2 431.1
Deferred tax liabilities 89.9 105.5
Pension liabilities 67.5 74.2
Provisions 61.8 18.8
Total non-current liabilities 828.4 629.6
Current liabilities
Interest-bearing current liabilities 559.3 625.0
Interest-free current liabilities 485.2 473.6
Provisions 10.8 6.2
Total current liabilities 1,055.3 1,104.8
Liabilities directly associated with non-current
assets classified as held for sale - 6.2
Total liabilities 1,883.7 1,740.6
Total equity and liabilities 2,859.7 2,827.9
Available-for-sale financial assets include also shares entitling to
electricity from a nuclear power plant currently under construction
in Finland. In previous financial statements these shares have been
accounted at acquisition value. In May 2008, the market price of
these nuclear power plant shares was determined by an external third
party share trading transaction. The Group has booked a revaluation
of the shares based on the market transaction.
CONSOLIDATED CASH FLOW STATEMENT
EUR million
2008 2007
Cash flows from operating activities
Adjusted operating profit 217.0 281.1
Interests -75.2 -36.3
Dividend income 1.0 2.0
Income taxes paid -23.9 -35.6
Total funds from operations 118.9 211.2
Change in net working capital -28.7 -39.1
Total cash flows from operating activities 90.2 172.1
Cash flows from investing activities
Capital expenditure for acquisitions -180.8 -66.6
Other capital expenditure -161.0 -254.4
Proceeds from sale of assets 254.3 -0.2
Net cash used in investing activities -87.5 -321.2
Cash flow after investing activities 2.7 -149.1
Cash flows from financing activities
Change in non-current loans
(increase +, decrease -) 426.6 53.7
Change in non-current loan receivables
(decrease +, increase -) -7.1 2.5
Short-term financing, net
(increase +, decrease -) -282.1 117.8
Dividends paid -64.2 -60.8
Other -9.1 12.3
Net cash used in financing activities 64.1 125.5
Net change in cash and cash equivalents 66.8 -23.6
Cash and cash equivalents at end of period 119.4 52.6
Cash and cash equivalents at
beginning of period 52.6 76.2
Net change in cash and cash equivalents 66.8 -23.6
CONSOLIDATED CASH FLOW STATEMENT 10-12/ 10-12/
EUR million 2008 2007
Cash flows from operating activities
Adjusted operating profit 9.6 18.7
Interests -27.6 -9.0
Dividend income 0.9 0.0
Income taxes paid -5.7 -11.3
Total funds from operations -22.8 -1.6
Change in net working capital 35.9 59.8
Total cash flows from operating activities 13.1 58.2
Cash flows from investing activities
Capital expenditure for acquisitions -40.4 -19.4
Other capital expenditure -44.7 -75.7
Proceeds from sale of assets 9.0 11.2
Net cash used in investing activities -76.1 -83.9
Cash flow after investing activities -63.0 -25.7
Cash flows from financing activities
Change in non-current loans
(increase +, decrease -) 223.5 -6.3
Change in non-current loan receivables
(decrease +, increase -) 1.5 3.2
Short-term financing, net
(increase +, decrease -) -107.7 12.0
Dividends paid 0.0 -0.5
Other 3.2 9.7
Net cash used in financing activities 120.5 18.1
Net change in cash and cash equivalents 57.5 -7.6
Cash and cash equivalents at end of period 119.4 52.6
Cash and cash equivalents at 61.9 60.2
beginning of period 57.5 -7.6
Net change in cash and cash equivalents
STATEMENT OF CHANGES IN
EQUITY
EUR million
Capital
paid-in Fair
in value
Share excess and other Exchange
of
capital par reserves differences
value
Shareholders' equity at
January 1, 2007 221.6 257.9 62.7 -30.8
Available-for-sale assets -
change in fair value - - 7.2 -
Exchange differences - - - -16.3
Hedge of net investments in
foreign entities - - - 6.0
Cash flow hedging: amount
entered in
shareholders' equity - - -1.9 -
Acquired minority interest - - - -
Transfer between restricted
and non-restricted equity - - 0.2 -
Items recognized directly
in equity 68.2 -41.1
Net profit for the period - - - -
Total recognized income and
expenses 68.2 -41.1
Options subscribed
for shares 0.2 - - -
Shareholders' equity at
December 31, 2007 221.8 257.9 68.2 -41.1
Shareholders' equity at
January 1, 2008 221.8 257.9 68.2 -41.1
Available-for-sale assets -
change in fair value - - 35.3 -
Exchange differences - - -0.4 -72.6
Hedge of net investments in
foreign entities - - - 9.1
Cash flow hedging: amount
entered in
shareholders' equity - - -22.0 -
Transfer between restricted
and non-restricted equity - - 0.5 -
Other changes - - -0.2 -
Items recognized directly
in equity 81.4 -104.6
Net profit for the period - - - -
Total recognized income and
expenses 81.4 -104.6
Shareholders' equity at
December 31, 2008 221.8 257.9 81.4 -104.6
Treasury Retained Minority
Shares Earnings Interests Total
Shareholders' equity at
January 1, 2007 -26.8 585.3 12.6 1,082.5
Available-for-sale assets -
change in fair value - - - 7.2
Exchange differences - - 0.9 -15.4
Hedge of net investments in
foreign entities - - - 6.0
Cash flow hedging: amount
entered in
shareholders' equity - - - -1.9
Acquired minority interest - - 0.4 0.4
Transfer between restricted
and non-restricted equity - -0.2 - 0.0
Other changes 0.1 0.2 0.2 0.5
Items recognized directly
in equity -26.7 585.3 14.1 1,079.3
Net profit for the period - 63.7 3.8 67.5
Total recognized income and
expenses -26.7 649.0 17.9 1,146.8
Dividends paid - -58.2 -2.6 -60.8
Share-based compensation - 1.1 - 1.1
Treasury shares issued to
key employees 0.8 -0.8 - 0.0
Options subscribed
for shares - - - 0.2
Shareholders' equity at
December 31, 2007 -25.9 591.1 15.3 1,087.3
Shareholders' equity at
January 1, 2008 -25.9 591.1 15.3 1,087.3
Available-for-sale assets -
change in fair value - - - 35.3
Exchange differences - - -1.2 -74.2
Hedge of net investments in
foreign entities - - - 9.1
Cash flow hedging: amount
entered in
shareholders' equity - - - -22.0
Transfer between restricted
and non-restricted equity - -0.5 - 0.0
Other changes - 3.2 -0.9 2.1
Items recognized directly
in equity 0.0 593.8 13.2 1,037.6
Net profit for the period - -1.8 3.6 1.8
Total recognized income and
expenses 0.0 592.0 16.8 1,039.4
Dividends paid - -60.6 -3.6 -64.2
Share-based compensation - 0.8 - 0.8
Shareholders' equity at
December 31, 2008 -25.9 532.2 13.2 976.0
Kemira had in its possession 3,854,465 of its treasury shares at
December 31, 2008. The number of treasury shares was the same as at
the end of the year 2007. Their average acquisition share price was
EUR 6.73 and the treasury shares represented 3.1% of the share
capital and of the aggregate number of votes conferred by all the
shares. The equivalent book value of the treasury shares is EUR 6.8
million.
KEY FIGURES
2008 2007
Earnings per share, basic and
diluted, EUR -0.02 0.53
Earnings per share excluding write-downs,
basic and diluted, EUR -0.02 0.87
Cash flow from operations
per share, EUR 0.74 1.42
Capital expenditure, EUR million 341.8 321.0
Capital expenditure / revenue, % 12.1 11.4
Average number of shares (1000),
basic * 121,191 121,164
Average number of shares (1000),
diluted * 121,191 121,194
Number of shares at the end
of the period (1000), basic * 121,191 121,191
Number of shares at the end of the
period (1000), diluted * 121,191 121,191
Equity per share, attributable to
equity holders of the parent, EUR 7.94 8.85
Equity ratio, % 34.1 38.6
Gearing, % 107.5 92.3
Interest-bearing net liabilities, EUR million 1,049.1 1,003.4
Personnel (average) 9,954 10,008
KEY FIGURES 10-12/ 10-12/
2008 2007
Earnings per share, basic and
diluted, EUR -0.57 -0.39
Earnings per share excluding write-downs,
basic and diluted, EUR -0.57 -0.05
Cash flow from operations
per share, EUR 0.10 0.48
Capital expenditure, EUR million 85.1 95.1
Capital expenditure / revenue, % 13.6 14.5
Average number of shares (1000),
basic * 121,191 121,191
Average number of shares (1000),
diluted * 121,191 121,191
Number of shares at the end
of the period (1000), basic * 121,191 121,191
Number of shares at the end of the
period (1000), diluted * 121,191 121,191
* Number of shares outstanding, excluding the
number of shares bought back.
REVENUE BY BUSINESS AREA 10-12/ 10-12/
EUR million 2008 2007 2008 2007
Kemira Pulp&Paper 258.3 253.6 1,057.7 1,043.0
Kemira Water 190.6 180.3 760.0 686.4
Kemira Specialty 63.7 102.0 375.3 425.9
Kemira Coatings 103.5 118.4 648.1 625.2
Other and Intra-Group sales 11.5 0.1 -8.4 29.7
Total 627.6 654.4 2,832.7 2,810.2
OPERATING PROFIT BY 10-12/ 10-12/
BUSINESS AREA 2008 2007 2008 2007
EUR million
Kemira Pulp&Paper -38.0 -1.8 2.2 68.2
Kemira Water -12.7 3.8 10.9 43.6
Kemira Specialty 9.8 -13.9 36.4 13.5
Kemira Coatings -12.6 -5.9 59.2 73.1
Other and eliminations -14.6 -25.1 -34.7 -55.3
Total -68.1 -42.9 74.0 143.1
CHANGES IN PROPERTY, PLANT AND EQUIPMENT
EUR million 2008 2007
Carrying amount at beginning of year 984.3 987.1
Acquisitions of subsidiaries 6.3 14.3
Increases 127.9 215.7
Decreases -9.4 -2.5
Disposal of subsidiaries -168.1 -7.8
Depreciation and impairments -144.5 -133.2
Exchange rate differences and
other changes -30.8 -89.3
Net carrying amount at end of period 765.7 984.3
CHANGES IN INTANGIBLE ASSETS
EUR million 2008 2007
Carrying amount at beginning of year 738.9 689.9
Acquisitions of subsidiaries 36.3 32.2
Increases 24.3 30.4
Decreases - -0.3
Disposal of subsidiaries -8.1 -0.1
Depreciation and impairments -24.9 -40.6
Exchange rate differences and
other changes 0.2 27.4
Net carrying amount at end of period 766.7 738.9
CONTINGENT LIABILITIES 31.12. 31.12.
EUR million 2008 2007
Mortgages 43.3 62.1
Assets pledged
On behalf of own commitments 5.2 6.0
Guarantees
On behalf of own commitments 14.1 8.3
On behalf of associates 1.2 1.4
On behalf of others 5.5 2.8
Operating leasing liabilities
Maturity within one year 20.9 22.4
Maturity after one year 115.0 129.0
Other obligations
On behalf of own commitments 2.6 0.4
On behalf of associates 1.9 2.3
Major off-balance sheet investment commitments
There were no contractual commitments for the acquisition of
property, plant and equipment on December 31, 2008.
Litigation
The Group has extensive international operations and is involved in
a number of legal proceedings incidental to these operations. The
Group does not expect the outcome of any legal proceedings
currently pending to have materially adverse effect upon its
consolidated results or financial position.
RELATED PARTY
The joint venture between Kemira Oyj and Rockwood Holdings, Inc.
began operating in the beginning of September. This joint venture
combines Kemira's and Rockwood's titanium dioxide business and
Rockwood's functional additives business. The venture is 61 per
cent owned by Rockwood and 39 per cent owned by Kemira.
Transactions with other related parties have not changed materially
after annual closing 2007.
DERIVATIVE INSTRUMENTS
EUR million
31.12.2008 31.12.2007
Nominal Fair Nominal Fair
value value value value
Currency instruments
Forward contracts 427.6 11.7 942.9 -1.4
of which hedges of
net investment
in a foreign operation - - - -
Currency options
Bought - - 65.5 0.1
Sold - - 57.8 0.2
Currency swaps
27.6 -5.6 147.2 6.5
Interest rate instruments
Interest rate swaps 338.8 -6.9 174.0 2.3
of which cash flow hedge 304.4 -6.5 164.0 2.0
Interest rate options
Bought 110.0 -0.1 10.0 -
Sold - - - -
Bond futures 10.0 0.0 10.0 0.2
of which open 10.0 0.0 10.0 0.2
Other instuments Fair value Fair value
Electricity forward 1431.5 -10.7 833.6 10.0
contracts, bought, GWh
of which cash flow hedge, 1378.9 -9.7 833.6 10.0
GWh
Electricity forward 52.6 1.2 - -
contracts, sold, GWh
of which cash flow hedge, - - - -
GWh
Natural gas hedging, K tons 15.6 -2.0 - -
of which cash flow hedge 15.6 -2.0 - -
Salt derivatives (k tons) 212.8 2.0 - -
The fair values of the instruments which are publicly traded
are based on market valuation on the date of reporting. Other
instruments
have been valuated based on net present values of future cash flows.
Valuation models have been used to estimate the fair values of
options.
Nominal values of the financial instruments do not necessarily
correspond to the actual cash flows between the counterparties and
do not therefore give a fair view of the risk position of the
Group.
BUSINESS COMBINATIONS
Nheel Quimica Ltda
Kemira acquired the entire share capital of the Brazilian Nheel
Quimica Ltda in a transaction confirmed on November 15, 2008. Nheel
Quimica Ltda is Brazil's second largest manufacturer of iron salts
and the largest manufacturer of aluminum salts used in water
treatment. Nheel Quimica Ltda has a production facility in Rio Claro,
in the state of Sao Paolo. The company primarily serves companies in
the municipal water treatment and waste water treatment sectors. As a
result of increasingly stringent environmental legislation, the use
of coagulants is growing rapidly in the largest Brazilian cities.
The purchase price was EUR 39.4 million, which was paid in cash and
financed with the Group's existing financing agreements. The
estimated capitalized acquisition costs directly attributable to
combination were EUR 0.3 million.
The revenue of the acquired business in the period from date of
purchase to December 31, 2008 was EUR 6.5 million and operating
profit EUR 1.1 million.
A total of EUR 0.1 million of the EUR 39.4 million acquisition cost
was allocated to inventories of finished goods. The acquisition
therefore generated EUR 29.9 million of goodwill. Goodwill is based
on future earnings expectations and significant synergy benefits.
Fair values Carrying
amounts
recorded on prior to
business
business combination
combination
Property, plant and equipment 5.5 5.5
Other investments 0.7 0.7
Inventories 1.5 1.4
Trade receivables and other
receivables 5.3 5.3
Cash and cash equivalents 3.3 3.3
Total 16.3 16.2
Deferred tax liabilities - -
Other liabilities 6.8 6.8
Total liabilities 6.8 6.8
Net assets 9.5 9.4
Cost of business combination (net) 39.4
Goodwill 29.9
Acquisition cost 39.4
Cash and cash equivalents in subsidiary
acquired -3.3
Cash outflow on acquisition total 36.1
Aggregate of business acquisitions
Kemira made the following acquisitions in 2008: Finncolor
Slovakia s.r.o.(100%) and Färggädje Målerbutiken i Alvik
AB (100%)
These business combinations are individually immaterial.
Fair values Carrying
amounts
recorded on prior to
business
business combination
combination
Other intangible assets 4.0 0.0
Property, plant and equipment 0.4 0.4
Other investments 0.1 0.1
Inventories 1.3 1.3
Trade receivables and other
receivables 0.6 0.6
Cash and cash equivalents 0.9 0.9
Total assets 7.3 3.3
Deferred tax liabilities 1.0 -
Other liabilities 0.9 0.9
Total liabilities 1.9 0.9
Net assets 5.4 2.4
Cost of business combination
(net) 6.5
Goodwill 1.0
Acquisition cost 6.5
Unpaid acquisition cost -1.1
Cash and cash equivalents in
subsidiaries acquired -0.9
Cash outflow on acquisition 4.5
Effect of business combinations on
revenue and profit
Kemira's revenue for Jan.1-Dec.31, 2008 would have been
EUR 2,871 million and operating profit EUR 80 million if
all of the business combinations carried out during the
period had been completed on January 1, 2008.
QUARTERLY INFORMATION 2008 2008 2008 2008
EUR million Q4 Q3 Q2 Q1
Revenue
Kemira Pulp&Paper 258.3 281.9 253.6 263.9
Kemira Water 190.6 202.3 187.6 179.5
Kemira Specialty 63.7 95.8 108.8 107.0
Kemira Coatings 103.5 193.7 205.7 145.2
Other and intra-Group sales 11.5 6.3 -14.2 -12.0
Total 627.6 780.0 741.5 683.6
Operating profit
Kemira Pulp&Paper -38.0 14.5 10.1 15.6
Kemira Water -12.7 8.9 5.5 9.2
Kemira Specialty 9.8 21.2 1.6 3.8
Kemira Coatings -12.6 30.4 29.7 11.7
Other including eliminations -14.6 -5.2 -7.6 -7.3
Total -68.1 69.8 39.3 33.0
Operating profit, excluding non-recurring items
Kemira Pulp&Paper 9.4 15.3 10.1 15.6
Kemira Water 7.4 9.0 5.5 6.8
Kemira Specialty 11.4 7.1 1.6 3.8
Kemira Coatings -12.6 30.4 29.7 11.7
Other including eliminations -3.9 -5.3 -9.7 -10.7
Total 11.7 56.5 37.2 27.2
QUARTERLY INFORMATION 2007 2007 2007 2007
EUR million Q4 Q3 Q2 Q1
Revenue
Kemira Pulp&Paper 253.6 259.7 267 262.7
Kemira Water 180.3 175 173.2 157.9
Kemira Specialty 102 109.8 110.6 103.5
Kemira Coatings 118.4 182.3 188.7 135.8
Other and intra-Group sales 0.1 2.7 13.5 13.4
Total 654.4 729.5 753 673.3
Operating profit
Kemira Pulp&Paper -1.8 23.8 23.3 22.9
Kemira Water 3.8 14.7 13.1 12
Kemira Specialty -13.9 10 7.1 10.3
Kemira Coatings -5.9 38.9 27.3 12.8
Other including eliminations -25.1 -7.9 -13.2 -9.1
Total -42.9 79.5 57.6 48.9
Operating profit, excluding non-recurring items
Kemira Pulp&Paper 12.3 22.6 23.3 21.6
Kemira Water 6.9 14.7 13.1 12
Kemira Specialty -2 8.7 7.1 10.3
Kemira Coatings -3.5 27.7 27.3 12.8
Other including eliminations -9.6 -7.9 -14.2 -8.6
Total 4.1 65.8 56.6 48.1
DEFINITIONS OF KEY FIGURES
Earnings per share (EPS): Equity ratio, %:
Net profit attributable to Total equity x 100 /
equity holders Total assets - prepayments
of the parent / received
Average number of shares
Cash flow from operations: Gearing, %:
Cash flow from operations, Interest-bearing net
after change in liabilities x 100 /
net working capital Total equity
and before investing
activities
Cash flow from operations Interest-bearing net liabilities:
per share: Interest-baring liabilities -
Cash flow from operations / money market investments -
Average number of shares cash and cash equivalents
Equity per share: Return on capital employed
Equity attributable to equity (ROCE), %:
holders of the parent at Operating profit + share
end of quarter / of profit or loss of associates x 100
/
Number of shares at (Net working capital +
end of quarter property, plant and equipment available
for use + intangible
assets + investments in
associates) *
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