Segments

Segments

Paper

Paper has unique expertise in applying chemicals and supporting pulp & paper producers to innovate and constantly improve their operational efficiency. We develop and commercialize new products to fulfill customer needs and to ensure the leading portfolio of products and services for paper wet-end, focusing on packaging and board, as well as tissue. We leverage our strong pulp & paper application portfolio in North America and EMEA and build a strong position in China, Indonesia and Brazil.

EUR million Jan–Dec 2013  Jan–Dec 2012 
Revenue  1,067.6  1,005.6
Operative EBITDA  130.3  117.5
Operative EBITDA, %  12.2  11.7
EBITDA  97.7  93.3
EBITDA, % 9.1  9.3
Operative EBIT  86.5  75.3
Operative EBIT, %  8.1  7.5
EBIT  45.7  44.7
EBIT, % 4.3 4.4
Capital employed* 758.0 777.2
ROCE* 6.0 5.8
Capital expenditure 75.2 72.2
Cash flow after investing activities 55.9 8.1
*12-month rolling average (ROCE, % based on the reported EBIT)

Paper segment’s revenue increased 6% to EUR 1,067.6 million (1,005.6). The revenues in local currencies and excluding acquisitions and divestments grew 8% due to the sales volume growth, especially in polymers, sizing agents and other differentiated process chemicals. Sales price changes did not have a material impact on revenues. Currency exchange had a -2% impact.

Paper segment’s revenues in EMEA increased 11% to EUR 606.3 million (546.5) driven by increased sales volumes of the two biggest differentiated product lines, polymers and sizing, as well as other process chemicals and bleaching chemicals. During the year, Kemira started four new AKD sizing production lines of which two in the EMEA region, one in NAFTA and one in APAC. New production lines support Kemira to better serve its big sizing customers in the various regions. Growth of other process chemicals sales volumes was supported by increased Fennobind binder capacity that was succesfully ramped up in the continental Europe in 2013.

In NAFTA, revenues, excluding the -4% currency exchange impact, increased 7% to EUR 294.7 million (286.2). Growth was mainly driven by the increased differentiated chemicals sales volumes, as well as somewhat higher sales prices. In September, Kemira announced the acquisition of Soto Industries Inc. (Vancouver, Canada). Soto supplies a broad range of differentiated chemicals including digester scale control, silicone and oil-based defoamers, as well as polymers used in green liquor clarification and effluent treatment for pulp and papermaking.

In SA, revenues in local currencies grew nearly 7% to EUR 75.8 million (77.3), supported by sales volume growth in all main product lines. In July, Kemira completed the expansion of its hydrogen peroxide plant in Fray Bentos, Uruguay to serve the growing demand of the product in the SA region.

In APAC, sales volumes recovered during the year, but revenues declined approximately 5% to EUR 90.8 million (95.6), mainly due to lower market prices for fatty acid and thus lower sales prices for AKD wax, as well as unfavorable currency exchange. In December, Kemira started the test production of defoamer and deinking agents in its new production site in Nanjing, China. Production of the most important product line at the site, ASA sizing, is expected to start in the first quarter of 2014 and full scale production capacity is expected during the second quarter of 2014.

Operative EBIT increased 15% to EUR 86.5 million (75.3) as a result of higher sales volumes. Variable and fixed costs remained at the level of 2012. Currency exchange had EUR -4 million impact. The operative EBIT margin improved to 8.1% (7.5%).

Municipal & industrial

M&I is a leading water chemicals supplier for raw and waste water applications in EMEA and North America, and aims to capture selected growth opportunities in emerging markets. We enable our municipal and industrial customers to improve their water treatment efficiency by supplying them with competitive, high-performing products and value adding application support.

EUR million Jan–Dec 2013  Jan–Dec 2012 
Revenue 659.4  686.6
Operative EBITDA 68.3  64.0
Operative EBITDA, % 10.4  9.3
EBITDA  -0.5 34.0
EBITDA, % -0.1  5.0
Operative EBIT  45.8  39.2
Operative EBIT, %  6.9  5.7
EBIT -23.4  -16.5
EBIT, % -3.6 -2.4
Capital employed* 309.2 374.4
ROCE* -7.6 -4.4
Capital expenditure 46.9 31.7
Cash flow after investing activities 36.7 39.2
*12-month rolling average (ROCE, % based on the reported EBIT)

The Municipal & Industrial segment’s revenue decreased 4% to EUR 659.4 million (686.6). The revenues in local currencies and excluding acquisitions and divestments decreased by 2% due to the lower sales volumes, that could only partly be compensated by the higher sales prices. Currency exchange had an impact of -2%. Acquisition had a 1% impact and divestments a -1% impacts on revenues.

In EMEA, revenue remained nearly unchanged and was EUR 405.0 million (407.3). Sales volumes of water treatment chemicals grew slightly and could partly compensate for the somewhat lower sales prices. In September, Kemira announced that in line with its strategy, Municipal & Industrial has started the implementation of a new business model, driven by a more streamlined organization. The new organization has resulted in a reduction of approximately 50 employees and in a more focused R&D portfolio. The new business model includes customer segmentation based on customer needs and buying behaviour. The streamlined organization and the new business model are expected to result in more than EUR 5 million annual savings once fully implemented. In addition, Kemira sold some small commodity chemical product lines in Romania, and some small commodity chemical product lines, including a chemical distribution business in Denmark (closed on January 2, 2014) in the second half of 2013.

In NAFTA, revenue decreased 7% in local currencies to EUR 189.7 million (212.1). Lower sales volumes had negative impact on revenue while operative EBIT margin improved through a better product mix.

In December, Kemira divested its iron and aluminium coagulant business in Brazil. The divestment of the coagulant business in Brazil is in line with the Municipal & Industrial strategic focus on profitability improvement and cash flow maximization.

In April, Kemira decided to close its office in Hyderabad, India. At the same time, together with its joint venture partner, Kemira started to evaluate the possible future options for coagulant manufacturing joint venture facility in Vizag, India.

Operative EBIT increased 17% to EUR 45.8 million (39.2). “Fit for Growth” savings were the main reason for the improved profitability. Higher sales volumes and changes in sales prices also had positive impacts on the operative EBIT. Variable costs increased EUR 10 million, driven mainly by the higher propylene based raw material costs. The operative EBIT margin improved to 6.9% (5.7%). In November 2013, Kemira started test production in its coagulant plant in Dormagen, Germany. The investment will further strengthen Kemira’s manufacturing network in Western Europe and secure a long-term, cost-efficient access to hydrochloric acid, the key raw material for coagulants.

Oil & mining

O&M provides a unique combination of innovative chemicals and application knowledge that improves process efficiency and yield in oil, gas and metals recovery. We use our in-depth understanding of extraction processes to tailor solutions for water management and re-use. Expanding from our position in North America and EMEA, we continue to build a strong base for growth in South America, Middle East, and Africa.

EUR million Jan–Dec 2013  Jan–Dec 2012 
Revenue  311.5  321.1
Operative EBITDA  32.7  40.6
Operative EBITDA, %  10.5  12.6
EBITDA  24.6  31.2
EBITDA, % 7.9  9.7
Operative EBIT  17.4  25.9
Operative EBIT, %  5.6  8.1
EBIT  6.5  14.2
EBIT, % 2.1 4.4
Capital employed* 188.2 177.7
ROCE* 3.5 8.0
Capital expenditure 69.8 20.2
Cash flow after investing activities -60.6 -5.3
*12-month rolling average (ROCE, % based on the reported EBIT)

Oil & Mining segment’s revenue decreased 3% to EUR 311.5 million (321.1) including the impact of 3% of the previously reported carryover on the termination of low margin product sales. The revenue in local currencies, excluding the impact of exited product sales and acquisitions, remained at the same level as in 2012. Acquisition of 3F had 2% positive impact and currency exchange -3% impact on revenues.

In NAFTA, revenue in local currencies increased close to 10% to EUR 175.4 million (167.8), mainly due to the sales volume growth of polymers and other process chemicals. The acquisition of 3F in October 2013 had a 4% positive impact on revenues. 3F produces dry and emulsion polyacrylamide polymers and related process chemicals, supported by backward integrated key intermediates, such as bio-acrylamide and cationic monomers. Oil & Mining segment uses the 3F products in drilling, extraction and stimulation in the oil & gas industry and in production optimization in the mining industry.

In EMEA, revenue declined 9% to EUR 104.6 million (115.3) as a result of lower sales volumes and sales prices. Continued softness of the mining industry was the main reason for the lower sales activity.

The operative EBIT decreased 33% to EUR 17.4 million (25.9) as a result of lower revenue and higher fixed as well as variable costs. The operative EBIT margin declined to 5.6% (8.1%).

Chemsolutions

ChemSolutions reliably provides customers with formic acid and high-performing derivatives as well as environmentally sound bleaching agents. Our economy of scale, based on our world-class operations in EMEA in combination with our people’s dedication to quality and efficiency, enable us to continuously improve our competitiveness.

EUR million Jan–Dec 2013  Jan–Dec 2012 
Revenue  190.6  227.6
Operative EBITDA  20.7  27.3
Operative EBITDA, %  10.9  12.0
EBITDA  20.0  21.3
EBITDA, % 10.5  9.4
Operative EBIT 14.5  15.1
Operative EBIT, %  7.6  6.6
EBIT 13.8 -9.3
EBIT, % 7.2 -4.1
Capital employed* 99.1 192.6
ROCE* 13.9 -4.8
Capital expenditure 5.5 10.0
Cash flow after investing activities 82.3 23.6
*12-month rolling average (ROCE, % based on the reported EBIT)

ChemSolutions segment’s revenue decreased 16% to EUR 190.6 million (227.6). The revenue in local currencies and excluding divestments increased 2%, mainly due to the higher sales volumes in all main product lines. Sales prices were slightly lower than in 2012. The divestment of the food and pharmaceuticals businesses had an impact of -18% on revenues.

In December, Kemira signed an agreement to sell its formic acid business, including the feed and the airport runway de-icing product lines, to Taminco Corporation. The transaction includes a manufacturing asset for formic acid in Oulu, Finland and approximately 160 employees. The closing of the transaction is expected during the first quarter in 2014. Sodium percarbonate, the remaining business within the ChemSolutions segment, will stay within Kemira and will be reported as part of the Paper segment after closing. After the transaction is closed, the ChemSolutions segment will be discontinued.

Operative EBIT decreased 4% to EUR 14.5 million (15.1) mainly due to the divestment of the food and pharmaceuticals businesses. The operative EBIT margin increased to 7.6% (6.6%).