Kemira Oyj: Kemira Oyj's January-September 2024 Interim Report: Organic revenue growth with continued strong margin performance

Kemira Oyj, Interim Report, October 25, 2024 at 8.30 am (EEST)

Kemira Oyj's January-September 2024 Interim Report: Organic revenue growth with continued strong margin performance

This is a summary of the January-September 2024 Interim Report. The complete report with the tables is attached to this release and available at kemira.com/investors.

Q3 2024 performance, unadjusted for the Oil & Gas divestment

• Revenue decreased by 12% to EUR 727.6 million (828.7) due to the divestment of Oil & Gas.
• Operative EBITDA decreased by 8% to EUR 147.4 million (160.3) due to the divestment of Oil & Gas. The operative EBITDA margin increased to 20.3% (19.3%) with solid margin performance in both segments. EBITDA decreased by 9% to EUR 142.9 million (157.2). The differences between operative and reported figures are explained by items affecting comparability, which were mainly related to portfolio actions.
• Operative EBIT decreased by 6% to EUR 100.8 million (107.6) due to the divestment of Oil & Gas. EBIT decreased by 8% to EUR 96.3 million (104.5).
• Cash flow from operating activities was solid at EUR 112.2 million (173.1).
• EPS (diluted) decreased by 11% to EUR 0.41 (0.46) due to the divestment of Oil & Gas.

Q3 2024 performance, Oil & Gas divestment adjusted

• The Oil & Gas divestment adjusted revenue increased by 5% to EUR 727.6 million (694.3). Revenue in local currencies, excluding acquisitions and divestments, increased by 2% driven by continued good growth in the Industry & Water segment. Kemira's overall sales volumes increased year-on-year while sales prices declined, particularly in Pulp & Paper. Sequentially, sales volumes and sales prices were rather stable.
• The Oil & Gas divestment adjusted operative EBITDA increased by 2% to EUR 147.4 million (143.8), following improvement in both segments. The Oil & Gas divestment adjusted operative EBITDA margin was 20.3% (20.7%) with solid margin performance in both segment.
• The Oil & Gas divestment adjusted operative EBIT increased by 3% to EUR 100.8 million (97.8).

January-September 2024 performance, unadjusted for the Oil & Gas divestment

• Revenue decreased by 14% to EUR 2,224.3 million (2,574.8) due to the divestment of Oil & Gas.
• Operative EBITDA decreased by 11% to EUR 450.4 million (504.0) due to the divestment of Oil & Gas. The operative EBITDA margin increased to 20.2% (19.6), driven by improvement in both segments. EBITDA decreased by 11% to EUR 434.1 million (488.7). The differences between operative and reported figures are explained by items affecting comparability, which were mainly related to the divestment of Oil & Gas.
• Operative EBIT decreased by 11%, to EUR 312.4 million (350.4), due to the divestment of Oil & Gas. EBIT decreased by 12% to EUR 296.2 million (335.1).
• Cash flow from operating activities was solid, at EUR 319.2 million (412.7).
• EPS (diluted) decreased by 12%, to EUR 1.30 (1.48), mainly due to the divestment of Oil & Gas.

January-September 2024 performance, Oil & Gas divestment adjusted

• The Oil & Gas divestment adjusted revenue decreased by 1% to EUR 2,179.8 million (2,198.9). Revenue in local currencies, excluding acquisitions and divestments, decreased by 2% following revenue decline in the Pulp & Paper segment. Sales volumes increased year-on-year in both segments. Sales prices decreased, particularly in Pulp & Paper, as sales prices for energy-intensive pulp and bleaching chemicals declined from an elevated comparison period.
• The Oil & Gas divestment adjusted operative EBITDA was stable at EUR 447.1 million (446.6). The Oil & Gas divestment adjusted operative EBITDA margin was strong, at 20.5% (20.3%), following improvement in both segments.
• The Oil & Gas divestment adjusted operative EBIT decreased by 1% to EUR 309.2 million (311.8).

The Oil & Gas divestment

Kemira divested its Oil & Gas (O&G)-related portfolio on February 2, 2024. All comparisons in this report are made to the comparison period, which includes the Oil & Gas-related portfolio. Kemira's January-September 2024 figures include around EUR 45 million of revenue and around EUR 3 million of operative EBITDA from Oil & Gas. Kemira has also presented the Oil & Gas divestment adjusted figures and performance in the relevant parts of the report, which reflect the underlying business performance of Kemira's Pulp & Paper and Industry & Water segments. Kemira's management follows the Oil & Gas divestment adjusted figures. The adjusted figures for the comparison period are also available in a separate stock exchange release, published on February 9, 2024 and on kemira.com/investors. Kemira's outlook for 2024 includes the Oil & Gas-related portfolio until the closing date of the divestment, February 2, 2024.

Outlook for 2024 (unchanged)

Revenue
Kemira's revenue is expected to be between EUR 2,800 and EUR 3,200 million in 2024 (reported 2023 revenue: EUR 3,383.7 million).

Operative EBITDA
Kemira's operative EBITDA is expected to be between EUR 540 and EUR 640 million in 2024 (reported 2023 operative EBITDA: EUR 666.7 million).

Assumptions behind the outlook (unchanged)
Kemira's end-market demand (in volumes) is expected to grow in 2024 following expected gradual demand recovery in the pulp and paper market. The water treatment market is also expected to grow in 2024. Input costs are expected to remain rather stable during the year. The outlook assumes no major disruptions to Kemira's manufacturing operations, supply chain or Kemira's energy-generating assets in Finland. Foreign exchange rates are expected to remain at approximately current levels. The outlook for 2024 includes the Oil & Gas business until February 2, 2024, the closing date of the divestment transaction.

Kemira's President & CEO, Antti Salminen:

"We were satisfied with our continued, solid financial performance during Q3 2024. In terms of our end-markets, demand remained robust in water treatment while the gradual recovery in the pulp & paper market slowed during the quarter. We achieved organic growth of 2% as sales volume growth of over 5% exceeded the sales price decline. I was particularly pleased with the strong organic growth of 5% in Industry & Water, which is very much in line with our strategic ambition to expand our water business. Profitability remained strong and the operative EBITDA margin improved to above 20% with solid margin performance in both segments. The absolute operative EBITDA also increased to around EUR 147 million, with improvement in both segments. Our consistently solid margin performance is an illustration of the strength of our business model and of our structurally stronger and sustainable margins. The Science Based Targets Initiative (SBTi) validated our emission reduction targets for scopes 1, 2 and 3 in October, reflecting our commitment to operate sustainably.

The pulp and paper market was softer during the third quarter, particularly in the APAC region, and some of our customers also announced production curtailments in the EMEA region in September. We saw flat organic growth in the Pulp & Paper segment during the quarter as year-on-year sales volume growth was offset by lower sales prices. The Oil & Gas adjusted operative EBITDA margin improved and was solid at almost 18%.

Strong performance continued in the Industry & Water segment as end-market demand remained robust in both municipal and industrial water treatment in Q3 2024. The segment's organic growth was strong at 5% during the quarter, driven by higher year-on-year sales volumes in all regions. Sales prices declined slightly from the comparison period. The operative EBITDA margin remained strong at over 23% and operative EBITDA reached a record-high level of EUR 77 million.

We announced several strategic changes during the third quarter and also published new long-term financial targets in conjunction with our Capital Markets Day at the end of September: average annual organic growth of over 4% and an operative EBITDA margin of 18-21%. Operative ROCE was selected as a third target of over 16%. The new long-term financial targets illustrate both our ambition to grow, to retain a solid margin profile and to remain financially disciplined in organic and inorganic investments. In August, we announced a new operating model to further increase customer-centricity as well as both speed and agility. As of January 2025, we are planning to be organized in three business units: Water Solutions, Packaging & Hygiene Solutions and Fiber Essentials. Kemira's external financial reporting will also be based on these three business units as of Q1 2025.

During the quarter we announced several investments as part of our ambition to accelerate growth. We will expand coagulant capacity in the EMEA region to cater for increasing water treatment needs. We also took our first steps on the attractive and growing micropollutant removal market, via an acquisition. We have also made further progress with our renewable solutions strategy. In September, we announced that we are exploring options to expand our partnership with IFF on renewable polymers, including evaluating the investment opportunity for a commercial-scale manufacturing joint venture.

We have kept our outlook for 2024 unchanged for both revenue and operative EBITDA. Kemira's Board of Directors also confirmed the payment date for the second installment of the dividend of EUR 0.34, which will be November 5, 2024. I am confident that as we head towards 2025 we are better positioned for growth and can support our customers' business and sustainability efforts better with our planned new operating model."

KEY FIGURES AND RATIOS

EUR million	Jul-Sep	Jul-Sep	Jan-Sep	Jan-Sep	Jan-Dec
	2024	2023	2024	2023	2023
Revenue	727.6	828.7	2,224.3	2,574.8	3,383.7
Revenue, O&G divestment adjusted	727.6	694.3	2,179.8	2,198.9	2,889.0
Operative EBITDA	147.4	160.3	450.4	504.0	666.7
Operative EBITDA, O&G divestment adjusted	147.4	143.8	447.1	446.6	595.9
Operative EBITDA, %	20.3	19.3	20.2	19.6	19.7
Operative EBITDA %, O&G divestment adjusted	20.3	20.7	20.5	20.3	20.6
EBITDA	142.9	157.2	434.1	488.7	540.0
EBITDA, %	19.6	19.0	19.5	19.0	16.0
Operative EBIT	100.8	107.6	312.4	350.4	463.0
Operative EBIT, O&G divestment adjusted	100.8	97.8	309.2	311.8	415.5
Operative EBIT, %	13.9	13.0	14.0	13.6	13.7
Operative EBIT %, O&G divestment adjusted	13.9	14.1	14.2	14.2	14.4
EBIT	96.3	104.5	296.2	335.1	336.4
EBIT, %	13.2	12.6	13.3	13.0	9.9
Net profit for the period	67.2	75.2	211.6	238.4	211.3
Earnings per share, diluted, EUR	0.41	0.46	1.30	1.48	1.28
Capital employed*	1,963.2	2,188.9	1,963.2	2,188.9	2,155.5
Capital employed*, O&G divestment adjusted	1,911.4	1,855.7	1,911.4	1,855.7	1,856.0
Operative ROCE*, %	21.7	21.6	21.7	21.6	21.5
Operative ROCE, %, O&G divestment adjusted	21.6	23.0	21.6	23.0	22.4
ROCE*, %	15.2	21.3	15.2	21.3	15.6
Cash flow from operating activities	112.2	173.1	319.2	412.7	546.0
Capital expenditure excl. acquisition	35.1	54.4	96.2	132.3	204.9
Capital Expenditure excl. Acquisitions, O&G divestment adjusted	35.1	50.6	96.2	121.7	187.7
Capital expenditure	38.2	54.4	99.4	134.1	206.8
Cash flow after investing activities	67.1	119.0	316.3	288.8	349.3
Equity ratio, % at period-end	54	48	54	48	48
Equity per share, EUR	11.26	10.81	11.26	10.81	10.84
Gearing, % at period-end	18	34	18	34	32

*12-month rolling average

Unless otherwise stated, all comparisons in this report are made to the corresponding period in 2023.

Kemira provides certain financial performance measures (alternative performance measures) that are not defined by IFRS. Kemira believes that alternative performance measures followed by capital markets and Kemira management, such as revenue growth in local currencies, excluding acquisitions and divestments (=organic growth), EBITDA, operative EBITDA, operative EBIT, cash flow after investing activities, and gearing, provide useful information on Kemira's comparable business performance and financial position. Selected alternative performance measures are also used as performance criteria in remuneration.

Kemira's alternative performance measures should not be viewed in isolation from the equivalent IFRS measures, and alternative performance measures should be read in conjunction with the most directly comparable IFRS measures. Definitions of the alternative performance measures can be found in the definitions of the key figures in this report, as well as at www.kemira.com > Investors > Financial information. All the figures in this report have been individually rounded and consequently the sum of the individual figures may deviate slightly from the total figure presented.

Financial targets

Kemira announced on September 25, 2024, that its Board of Directors had approved the company's updated long-term financial targets. Kemira's target for average annual organic growth has been changed to over 4% (previously: above the market growth) and the operative EBITDA margin target has been increased to 18-21% (previously 15-18%). Operative ROCE of over 16% has been added as the third, new target.

Financial reporting schedule 2025

Financial Statements Bulletin for the year 2024 February 11, 2025
Interim report January-March 2025 April 25, 2025
Half-year financial report January-June 2025 July 18, 2025
Interim report January-September 2025 October 24, 2025

The Annual Report 2024 will be published during the week starting on February 17, 2025.
The Annual General Meeting is scheduled for Thursday, March 20, 2025.

Webcast and conference call for analysts, investors and media

Kemira will arrange a webcast for analysts, investors and the media on Friday, October 25, 2024, starting at 10.30 am EEST (8.30 am UK time). During the webcast, Kemira's President & CEO, Antti Salminen and CFO Petri Castrén will present results. The webcast will be held in English and can be followed at kemira.com/investors. The presentation material and a recording of the webcast will be available on the above-mentioned company website.

You can attend the Q&A session via conference call. You can access the teleconference by registering on the following link: https://palvelu.flik.fi/teleconference/?id=50047139

After registration you will be provided with phone numbers and a conference ID to access the conference. If you wish to ask a question please dial *5 on your telephone keypad to enter the queue.

For more information, please contact:

Kemira Oyj
Mikko Pohjala, Vice President, Investor Relations
Tel. [phone]
[e-mail]

Kemira is a global leader in sustainable chemical solutions for water-intensive industries. Our customers include industrial and municipal water treatment operators, and pulp & paper industry among others. We provide the best-suited products and services to improve our customers' product quality, process, and resource efficiency. Our focus is on water treatment, renewable solutions, and digital services. In 2023, Kemira had annual revenue of around EUR 3.4 billion and around 5,000 employees. Kemira shares are listed on the Nasdaq Helsinki Ltd. www.kemira.com