Global Market Wood Coatings Report - PowerPoint

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					Kemira Continues Strong Growth
   Lasse Kurkilahti, President & CEO
              June 2006




 Investor Relations: Päivi Antola, tel. +358 1086 21140
    Contents



       Strategy

       Strategies of the Business Areas

       Q1 Group Highlights




2
Strategy
    Business Areas




    Pulp & Paper   Water Treatment   Performance   Paints &
    Chemicals      Chemicals         Chemicals     Coatings




4
    Revenue 2005, Pro Forma ~ EUR 2.5 Billion
    Including Lanxess paper chemicals, Kraski Teks,
    Finnish Chemicals and Verdugt for the whole year




5
    Goal


     A global group of leading chemicals businesses with
       unique positions and high mutual synergy

       Great profitability, continuous improvement
       Continuous growth: organic and through M&A
       Participative, entrepreneurial company culture



       → More ambition, more dynamics



6
    Kemira - #1 in the World


                 Pulp & Paper                             Performance                Paints &
                                  Kemwater
                  Chemicals                                Chemicals                 Coatings

    Market        #1             #1 in coagulants       #1 in TiO2 for printing    #1 in Finland,
                                                      inks                      Sweden, Russia and
    position*                                                                   in the Baltic
                                                        #1 in selected
                                                      customer segments of countries
                                                      organic acids & salts



    Customers     Pulp & paper   Municipalities         Paints, printing inks,     Consumers,
                producers        Various industries   food, drugs, cosmetics     professional users,
                                                                                 wood finishing,
                                                                                 metal industry




                                                                          *Management estimates

7
    Building Blocks
    Divestments                                Acquisitions
    − Biolchim (2006)                          Pulp & Paper Chemicals
    − Coil coating (2005)                      + Lanxess paper chemicals (2006)
    − UK industrial coatings business (2004)   + Finnish Chemicals (2005)
    − GrowHow (2004)                           + E.QU.I.P (2004)
                                               + Rhodia (2003)
    − Fine Chemicals (2004)
                                               + Vulcan (2003)
    − Calcium Chloride business (2004)
                                               Kemwater
    − Ecocat (2004)
                                               + Eaglebrook (2004)
    − Kemira Engineering (2004)                + Zlotniki (2004)
    − Polargas (2003)                          + Belinka (2004)
                                               + Kemiron (2003)
                                               Performance Chemicals
                                               + IFAC (2006)
                                               + Verdugt (2005)
                                               Paints & Coatings
                                               + Kraski Teks (2006)
                                               + Kolorit paints (2004)

8
    Opportunities for Improved Profitability



      Streamlining the production network
      Professional attitude towards customers and suppliers
      Economies of scale, utilizing the leading position
      Internal synergies to use
      New Sales Ratio up
      Idle / low productive capital out

      → World class internal efficiency



9
     Opportunities for Growth


       Organic growth
         Extended sales
         New products
       Opportunity 5% / year

       Mergers and acquisitions




10
     Opportunities within the Business Areas

         Pulp & Paper Chemicals          Kemwater
           Implementing consolidation      Implement coagulant
           in selected areas               strategy with more speed
           Efficiency programs             Widen the product portfolio
           Global market EUR 20            Global target market EUR 8
           billion, growth 700 MEUR/a      billion, growth 600 MEUR/a


         Performance Chemicals           Paints & Coatings
           Applications                    Eastern Europe
           Customer orientation            Geographical target market
           Global niche market EUR 1.4     EUR 4 billion, growth 250
           billion, growth 100 MEUR/a      MEUR/a


11
     M&A Activities Continue


      Strategic fit
      Must increase EPS from year one
      Significant synergies
      Long-term gearing below 100%

      Financed with
         Cash / debt
         Share issues
         Divestment of non-core businesses




12
     Research & Development

                                           R&D expenditure breakdown in 2005:


      Total spend 2.2% of revenue                  Customer-oriented
         Varies between BAs and SBUs              product development
                                                      and service
                                                          39%
      New sales ratio ~ 20%

                                                    Business-specific
      R&D personnel ~ 650
                                                    research projects
      Co-operation with universities and                  37%
      research institutes
                                                       Group-wide
                                                    research projects
                                                          24%


13
     New Sales Ratio




                       □ New
                       □ NA
                       □ Old




14
     Financial Benchmarks
       Earnings / share
           Continuous improvement

       Growth: organic and through M&A

       Cash flow after capital expenditure (excl. acquisitions)
           Positive

       Return on capital employed
           > 20%             Great
           15 − 20%          Good
           10 − 15%          Acceptable
           < 10%             Not acceptable

     → Basis for incentive systems

15
     Shareholder Value




16
     Kemira from Good to Great

     Operational
      Efficiency
                                      Culture                            Brand
           &
      Strategy

All our actions lead towards    We have a strong, participative   We are regarded as
World Class Operational         and entrepreneurial culture.      the leading expert in
Efficiency.                                                       chemical solutions.
                                We create it through
Our strategy is unique, sharp   an open dialogue.                 The strong brand increases
and clear.                                                        our competitiveness.
                                Everyone can influence
                                their work and get rewarded       Brand Promises:
Our work is based on our
strategy every day.
                                for good performance.             – Reliable
                                                                  – Cooperative
                                People enjoy their work           – Responsible
                                at Kemira.                        – Proactive


17
Strategies of the Business Areas
     Pulp & Paper Chemicals

      No 1 pulp & paper chemicals supplier in the world
      Revenue 2005, pro forma ~ 1,050 MEUR (incl. Lanxess paper
      chemicals & Finnish Chemicals for the whole year)
      Good market position
         Globally        No 1
         Europe          No 2
         North America   No 2
         Nordic          No 1




19
     Kemira’s Pulp and Paper Chemicals Offering



         Pulping &                Paper
                                                               Coating
         Bleaching                making

      • Hydrogen Peroxide     • Retention                 • Calcium Sulphate
      • Sodium Chlorate       • Deposit Control           • Titanium Dioxide
      • Chlorine Dioxide      • Defoamers                 • Dispersing Agents
      • Sodium Borohydride    • Water Treatment           • Deposit Control
      • Caustic               • Deinking
      • Sulphur Products      • Sizing
      • Peracetic Acid        • Wet & Dry Strength       Bleaching Chemicals
      • Bleaching Additives   • Optical Brighteners *    Specialty Chemicals
      • Defoamers             • Colourants *             Pigments & Additives
      • Deposit Control
      • Water Treatment       Lanxess contribution:
                              *Complementing / Strengthening

20
Pulp and Paper Chemicals Market is Growing

               Total Market EUR 20 billion

                                            Bleaching
                                            Growth 2%/a

     Coating                      EUR 5.5
     Growth 4%/a    EUR 7.7       billion             Kemira’s share*:
                     billion                          - Bleaching 8%
                                                      - Specialty 8%
                               EUR 6.8                - Coating <1%
                               billion

                          Specialty Chemicals
                          Growth 5%/a
                                                     *Management estimates

21
     Fragmented Market
     Giving Opportunities for Growth
       MEUR             Bleaching   Specialty   Coating   Revenue
        Company
       Kemira           strong      strong      small       1050
       Ciba                         strong      medium       900
       Eka              strong      medium                   750
       BASF             small       medium      strong       730
       Hercules                     strong      small        730
       Dow                                      strong       670
       Nalco                        strong      small        550
       Clariant                     medium      small        260
       Erco             medium                               250
       Nexen            medium                               230
       Degussa          small       small                    190
       Solvay           medium                               180
       5 biggest co’s   25%         20%         35%         25%

22
     Pulp & Paper Chemicals

     MEUR   Revenue                     EBIT & ROCE
                              MEUR                              %




                               The figures are not fully comparable.

23
     Kemwater


      The leading global supplier of coagulation chemicals to municipal
      waterworks; solutions for industrial waste water and sludge treatment
      Revenue 2005: 353 MEUR
      Leading market position
      (coagulants)
         Global            No 1
         North America     No 1
         Europe            No 1
         Nordic            No 1




24
     Differentiation Drivers / Total Business Potential
                                                • R&D focus           •   SNF
                                            (Disinfection, Odour      •   Buchman
                                             and toxic removal)       •   Cytec
                                          • Polymers/specialities     •   Degussa

                                              EUR 2 billion
                                            Growth rate 5%/a



                          Package deals   • Sludge management
      Coagulants                                 (organic)
 (organic/acquisitions)

                                               EUR 2 billion
                                             Growth rate 8%/a

       EUR 2 billion                                                  • Ondeo
     Growth rate 4%/a                      • Industrial outsourcing   • Veolia
                                            (organic/acquisitions)    • Remondis

                                              EUR 2 billion
                                            Growth rate 15%/a

26
     Kemwater
 MEUR
              Revenue                         MEUR       EBIT & ROCE           %




                                              Q4/04 excluding extra write-downs and
      The figures are not fully comparable.   costs of 11 MEUR.

28
     Performance Chemicals

      Leading position in growing specialty chemicals markets
      Revenue 2005: 408 MEUR
      Good market position
         TiO2 Pigments: Leading producer of TiO2 for printing inks
         ChemSolutions: No 1 globally in selected customer segments
         Chemidet: No 3 globally




29
     Global Market Potential
                                                             Kemira’s
                                    Market size   Growth/a   position

TiO2 Pigments                       7,000 MEUR     GDP            7
   TiO2 pigments for printing ink   200 MEUR       2−5%           1
   FDC (Food, Drugs, Cosmetics,
   UV-Titan)                        200 MEUR       2−10%          2−3


ChemSolutions
  Organic Salts                     150 MEUR       2−3%           1
  Organic Derivatives               20 MEUR        3−10%          1
  Acidifiers & Preservatives        150 MEUR       5−10%          1
  Formic Acid                       250 MEUR       3−4%           2


Chemidet
  Detergent bleaching solutions     300 MEUR       0−10%          3
     (sodium percarbonate)

30
     ChemSolutions
     Segments and Market Positions
                                           Acidifiers &                                   Organic
                  Formic Acid                                    Organic Salts
                                          Preservatives                                  Derivatives
Market           World #2, 24%            Europe #1, 27%         World #1, 36%          Europe #1, 43%
position by      Europe #2, 40%
region,
market share
by volume*
Customer         Leather & Textile        Feed industry          Food                   Infrastructure
industries       Chemical                 Farming industry       Pharma               (de-icing)
                 Pharma                                                                 Various
                 Silage                                                               industries
                 Rubber etc.
Drivers and       Environmental           Increased hygiene      Safety & hygiene        Airport de-icing
Usage          friendliness             requirements for the   requirements              Increased need
                  Growing derivatives   food chain               Increased need       for environmental
                  pH control              Antibiotics ban in   for the treatment of   friendly solutions
                  Organic building      the feed industry      food products
               block                                             Consumer
                  Microbial control                            preferences: longer
                                                               shelf-life of food
                                                               supplies
                                                                             *Management estimates

31
     Performance Chemicals

     MEUR      Revenue                                   EBIT & ROCE
                                               MEUR                     %
                    Net sales




       The figures are not fully comparable.   *Continuing operations

32
     Paints & Coatings

      Leading player in North and East Europe with strong local
      brands (Tikkurila, Alcro, Beckers, Vivacolor, Teks, etc.)
      Revenue 2005: 458 MEUR
      Leading market positions
      in decorative paints
         Finland     No 1 *
         Sweden      No 1
         Baltic      No 1 *
         Poland      No 3
         Russia      No 1

       * and industrial paints




33
 Paint Consumption and
 Paints & Coatings’ Production Sites

                                                                             Population/country,
                                                                                         million

             4                      5              5
                                         9
                                                                  145
                          26    5             7
                 60

                                                   10
                 61        82            39
                           15           16                              15
                                                             47                                    5
        40                      6       10
                                              22   4
     20 < liters/person    58           21
                                               8                                       27    7
     10 < liters/person             4
                                                                  16
                                                                                   5
     5 < liters/person
                                         11             70
     Production site

34
     Growing Decorative Paint Market in Russia
                                                        Brands by price segment:

                                                                    Tikkurila,
                                                                   Akzo Nobel,      Top
                                                                   Caparol, ICI

                                                                                          Medium
                                                                  Düfa, Finncolor

                                                           Yaroslavskie Kraski, Empils,
                                                                                              Low
                                                            Teks, Cherkessk, Zagorsky,
                                                        Pigment, Odilak, Kotovsky, Raduga

                                                                 Source: Management estimates


      Significant growth potential in Russia
         Population of 145 million people
         Decorative paint consumption < 4 litres per capita (over 15 litres in Scandinavia)
         Total size of the Russian paint market approximately 450 million litres


35
     Paints & Coatings


      MEUR   Revenue                     EBIT & ROCE
                         MEUR
                                                           %



                                                  ------
                                         ------
                                ------




37
Q1 Group Highlights
     Strong Growth Continues


       Revenue up 37%
         Organic growth 11%
         Acquisitions 26% / EUR 105 million
            Finnish Chemicals
            Verdugt
            Kraski Teks


       EPS up 40%
         Continuous improvement of performance and efficiency
         Increases in raw material and energy prices were for a large part
         passed on into selling prices




39
     Growth Boosted by Acquisitions


                                                     Organic
                            Q1/06   Q1/05   Change   growth

      Revenue (MEUR)        552.9   403.7     37%      11%
      EBIT (MEUR)            45.5    30.3     50%
      EBIT, %                 8.2     7.5
      EPS (EUR)              0.21    0.15     40%
      ROCE, %                 9.9     9.4
      Cash flow after
      CapEx, excl.          -41.5   -43.5
      acquisitions (MEUR)



40
     Revenue up 37%
 MEUR




41
     Revenue Development 2002-2006

     Q1/2006: 552.9 MEUR, +37%
     (Q1/2005: 403.7 MEUR)
           MEUR




                                     *Continuing operations

42
     EBIT up 50%
 MEUR




43
     EBIT Development 2002-2006


            MEUR




                                  *Continuing operations. Excluding a
                                  write-down of 78 MEUR in Q4/02

44
     EPS by Quarter
     ROCE
           EUR        %




                          * Continuing operations
                          excluding a non-
                          recurring charge of 44.2
                          MEUR in Q4/04.
                          Q4/02 exludes a write-
                          down of 78 MEUR.


45
     Shareholders 28 April 2006

      (29 April 2005)




     Minimum state ownership 15%

46
     Outlook for 2006 – Kemira Group



            Kemira Group’s growth is expected to continue strongly
            during Q2
                 Organic growth
                 Acquisitions of Lanxess and Kraski Teks
            Raw material and energy prices are projected to remain
            high, putting pressure on business profitability
            Kemira’s revenue, EBIT and EPS for 2006 are expected
            to increase from 2005 levels



      All forward-looking statements in this report are based on the management’s present
     expectations and beliefs about future events, and the actual results may differ materially
          from the expectations and beliefs contained in the forward-looking statements.

47
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