Kemira and Bauminas have signed a contract according to which Kemira sells its Brazilian iron and aluminium coagulant business to Bauminas. The deal includes coagulant business related assets, liabilities and personnel of Kemira WaterSolutions Brazil Ltda and shares of Nheel Quimica Ltda as well as its three coagulants manufacturing sites in Brazil (Rio Claro, Araporti and Lages).
The sold businesses have combined reported revenue of approximately EUR 50 million, mainly in Kemira's Municipal & Industrial segment. 193 employees will be transferred to Bauminas as part of the transaction. The transaction is subject to fulfillment of certain conditions and the closing is still expected during the fourth quarter of 2013.
The parties have agreed not to disclose the transaction price. The transaction proceeds are expected to have a positive impact on Kemira's cash flow at closing. Kemira will undertake a non-recurring write-down related to the transaction of approximately EUR 40 million, impacting Kemira's reported EBIT in the fourth quarter of 2013.
"The divestment of our coagulant business in Brazil is well in line with our focus on profitability improvement and cash flow maximization in the Municipal & Industrial segment. Kemira's strategy continues to be focused on those businesses and geographies, where we can achieve a sustainable competitive market position in combination with growth. Exiting the coagulants business in Brazil will further improve the EBIT margin in the Municipal & Industrial segment and will have a positive cash flow impact as well. Brazil will remain an important market for Kemira, especially for the chemicals used in the pulp and paper industry" said Wolfgang Büchele, Kemira's President and CEO.
Kemira and Stora Enso have today announced the launch of a joint project to promote responsible water management and community engagement in Guangxi Province in Southern China. Water is a crucial resource for sustainable plantation forestry in Guangxi, where Stora Enso leases 90 000 hectares of land and manages eucalyptus tree plantations. The new project aims to find new solutions for responsible water management through stakeholder surveys, community work and water-related capacity building.
The project brings together Kemira's world class know-how on water quality and quantity management, Stora Enso's expertise on tree plantation management, and local communities' practical knowledge and experiences related to water issues in Guangxi. The project will enhance local competence in water management and increase awareness of water issues among industries and communities in the Beihai region of Guangxi Province.
The project will create shared value by improving Stora Enso's tree plantations operations, and by strengthening Kemira's role as the water management solutions provider for the paper industry and for local communities, as well as bringing new know-how and better water management tools to local communities.
During the project, Kemira and Stora Enso will carry out a detailed study of water resources in the area around Stora Enso's operations in Guangxi. Challenges will be mapped out, and local concerns such as the impacts of tree plantations on water quality and groundwater levels will be duly addressed.
Based on the results of the study, Kemira and Stora Enso will work together with local villagers to provide training on water issues and to examine possible employment opportunities related to water management. Pilot water management projects will be designed together with village representatives, and a water saving program will be launched for the Beihai area together with local partners and stakeholders. The project will start in December 2013 and last until the end of 2015. The details of project implementation and scheduling will be finalised together with the local communities.
"This is a unique project for Guangxi and also globally, and we are extremely proud to be involved," says Stora Enso's CEO Jouko Karvinen. "We will be bringing together the competences of two leading companies and the knowledge of the local community to create the best possible water solutions. As a signatory of the United Nations' Global Compact's CEO Water Mandate, water is a top priority for us wherever we operate. But this project is not just about the environment. Our investments in Guangxi aim to produce renewable packaging products for Chinese consumers but we also want to create value for all our stakeholders in Guangxi. Our ultimate aim is to help create a world class forest technology cluster in the area. This project represents a significant step along that road."
"For Kemira, this will be a major project in the field of corporate responsibility for the coming years. We are dedicated to creating value through our expertise in chemistry and water efficiency both for Stora Enso, one of our key customers, and for the local communities in Guangxi. We will collaborate to develop new solutions for managing water resources more efficiently and initiate activities to increase the awareness of water issues in the Beihai region. China is today the biggest paper and board producing country in the world. To grow sustainably, it is important to develop paper and board production which is strategically backward integrated into the pulp and plantation industries. We are committed to develop new solutions for these processes and to grow together with our customers in this important market," says Kemira's CEO Wolfgang Büchele.
Kemira will implement a price increase up to 15 %, depending on product segment, for its Pulp and Paper Chemicals. The adjustment will affect selected product lines between 5-15% and will be immediately implemented or as existing contracts allow.
The price increase is an effect of increases in all major cost drivers; including key feed stocks and raw material, energy and transport. Kemira has continuously rationalized operations and reduced fixed costs, but has now reached a point when a price increase is necessary to secure the position as a strong supplier to the Pulp & Paper Industry.
Kemira Oyj and Wilmar International Limited have, through their subsidiaries, signed a joint venture (JV) agreement for the manufacture of AKD wax in China in two joint ventures. The JV entities in China will be owned 50-50 and will integrate the current facilities of Kemira in Yanzhou and the relevant Wilmar facilities in Lianyungang. Teaming up of the two major players underlines the long-term interest and determination of both companies to better serve all paper customers globally. The transaction is subject to fulfillment of certain conditions including merger clearances. Closing of the transaction is currently expected to take place in the third quarter of 2014.
Kemira is a global, leading manufacturer of alkyl ketene dimer (AKD). AKD is a sizing agent, which impacts paper and board hydrophobicity and / or water resistance. Sufficient hydrophobicity is important for packaging materials and it improves paper and board runnability in a coating process at the same time. Water resistance also improves printability and dimension stability of the final product during the converting process.
"Kemira is the leading producer of synthetic sizes for the paper and packaging board industry. The JV with Wilmar is an important step in the implementation of Kemira's paper strategy" said Petri Helsky, President of Kemira's Paper segment. "Through the JV, we will strengthen our position in the sizing market in Asia Pacific and, at the same time, demonstrate our strategic commitment to the paper industry. The JV will also secure the supply of key raw materials needed in the manufacturing process in China due to the backwards integration into the fatty acid chlorination technology", said Joe Chan, President, APAC region.
Wilmar is a global leading producer of stearic acid, which is the key raw material for AKD production. "The JV, which will be an expansion down the oleochemicals value chain for Wilmar, will capitalize on Wilmar's advantage in sourcing of raw materials as well as on cost efficiencies from its integrated manufacturing operations. The JV will also enhance Wilmar's footprint in the Asia Pacific region", said Dave Cui Xinyu, Head of Wilmar Oleochemicals, China.
Kemira for the first time has achieved a top position in CDP's Nordic 260 Climate Disclosure Leadership Index (CDLI). Kemira achieved an excellent score of 96 out of 100 in the index which measures the disclosure of information regarding climate change. The result was announced on October 7 in the CDP Nordic 260 Climate Change Report 2013, which tracks how the Nordic listed companies are acting in response to a changing climate. The CDLI comprises the organizations that achieved a score within the top 10% of the sample assessed. In 2013 the Nordic 260 CDLI comprises 27 companies.
Riikka Timonen, Director, Corporate Responsibility comments: "Energy efficiency in our own operations as well as in and with the products and solutions we bring to the markets is a key for Kemira. For several years, we have carried out systematic improvements in our own energy efficiency, and our innovations are driven by the need to produce more with less. We are committed to innovate together with our customers for sustainable solutions where water meets chemistry to enable our customers to improve their water, energy and raw material efficiency."
The Nordic 260 report including names of companies featured in the CDLI can be found at www.cdp.net. CDP provides the world's only global environmental disclosure system. CDP represents 722 institutional investors with USD 87 trillion in assets under management.
Kemira's President and CEO Wolfgang Büchele have announced that he will resign from his current position as Kemira's President and CEO to become the CEO of Linde AG. Linde, a German gases and engineering company, had revenue of EUR 15,280 million and 61,965 employees in 2012. It has been agreed that Büchele will continue as Kemira's President and CEO until April 30, 2014.
Kemira Oyj's Chairman of the Board Jukka Viinanen: "While I regret the departure of Wolfgang, I respect his decision to take the position as the CEO of Linde. Wolfgang has brought Kemira extensive and broad industrial knowledge combined with international experience and network. During his period as the President and CEO, Wolfgang successfully started a significant structural change in Kemira to become a profitable water quality and quantity management focused company. I would like to take the opportunity to thank Wolfgang for the valuable work he did as a CEO. With its strong Management Board and experienced Board of Directors, Kemira will continue to implement the started change initiatives and focus to deliver on our strategy."
Kemira Board of Directors has already initiated the search for the new President and CEO.
Kemira has signed an agreement to acquire Soto Industries Inc, a privately owned company, headquartered in Vancouver, Canada. Soto is a specialty chemicals and services supplier to the pulp and paper industry.
Soto supplies a broad range of specialty chemicals including digester scale control, silicone and oil-based defoamers, and polymers used in green liquor clarification and effluent treatment for pulp and papermaking.
"This acquisition helps us accelerate our strategic plan and secures our position as a leading supplier to the pulp and paper industry in North America. It also supports Kemira's objective of achieving above-the-market growth in the mature markets. In addition to the strong strategic fit, the transaction is expected to result in synergies through raw material, logistics and fixed cost savings." says Billy Ford, Senior Vice President, Paper segment, North America.
The transaction does not have material impact on Kemira's financial figures and the parties have agreed not to disclose the transaction price.
Kemira has successfully ramped up new Fennobind production capacity in Continental Europe. With the increased capacity, Kemira is preparing to launch the 2nd generation Fennobind products that will further increase the production output and the end value to the customer. Reception in the market has been very positive and Kemira will continue to invest in the technology.
Binders are used to bind the coating pigments and the coating layer to the base paper in order to improve paper optics and printability. Due to improved binding strength of the product, Fennobind’s patented technology allows lower manufacturing costs for paper and board producers.
Kemira will hold its 2013 Capital Markets Day (CMD) in London today.
Kemira is maintaining its existing outlook for 2013. Revenue in local currencies and excluding divestments is expected to be slightly higher (0%-5%) than in 2012, and operative EBIT is expected to be significantly higher (>15%) than in 2012.
Kemira's medium-term financial targets for 2016 remain as previously communicated.
In addition, Kemira expects its medium-term operative tax rate to be in the range of 22%-24%. This rate excludes non-recurring items and the contribution of income from associated companies.
The theme of the CMD is "Delivering a profitable water pure-play". Wolfgang Büchele, President and CEO, will comment on the structural changes that are contributing to meeting the financial targets and improving Kemira's return on capital employed.
"Kemira is targeting an operative EBIT margin of 10% in 2014. The target is expected to be achieved through a number of factors, including the Fit for Growth cost savings, additional efficiency measures, like the Vaasa process chemicals site closure and the establishment of a global Business Service Center, as well as synergies relating to the recent 3F acquisition (closure of the transaction expected on October 1, 2013). In addition, the reorganization and changes in the business model in Municipal & Industrial are expected to result in more than EUR 5 million savings once fully implemented.
As previously communicated, our capex-to-sales ratio is expected to decrease from 6% in 2012 to 5% in 2016. Capital expenditure is focused on growth markets and differentiated product lines. Acquisitions are also expected to contribute to Kemira's mid-term growth targets. M&A criteria require that M&A targets must strengthen Kemira's market position and/or technologies and/or competencies, as well as being EBIT accretive in the second full year after closing.
Kemira's business portfolio focus is shifting from commodity to differentiated businesses. Consequently, we are evaluating exit options for the ChemSolutions business, which include formic acid and its derivative product lines. Together with the ongoing Fit for Growth cost-saving measures, continuous efficiency measures, the introduction of LEAN manufacturing and the implementation of our SKU (Stock Keeping Unit) reduction program, the company's business portfolio restructuring is expected to also improve return on capital employed. Our ambition in 2016 is for return on capital employed to be in line with the European chemical sector average, i.e. more than 15%.
Innovation is the key organic growth driver, and Kemira is targeting EUR 250 million revenue from innovation sales (i.e. sales from new products or existing products for new applications launched within the previous 5 years) in 2016 (EUR 106 million in 2012). Our next generation Fennobind product for the paper and board market and new products for wet shale applications in the oil and gas industry are all examples of the growing relevance of our innovation pipeline," says Büchele.
Other Kemira speakers at the CMD include Petri Castrén, CFO, Frank Wegener, President, Municipal & Industrial segment, Heidi Fagerholm, CTO, Michael Löffelmann, SVP, Restructuring, Louis Rosati, VP, R&D and technology and Reetta Strengell, Senior manager, R&D and technology.
Kemira has just signed a 5+1+1 year EUR 400 million revolving credit facility with eight banks. This is a committed credit facility to be used for general corporate purposes. The new facility replaces undrawn EUR 300 million facility signed in June 2011. The loan agreement includes a financial covenant based on gearing.
Banks acting as Mandated Lead Arrangers and Bookrunners are Nordea Bank, Danske Bank, Citi Bank, Commerz Bank, Pohjola Bank plc, SEB and Swedbank. ING N.V. acts as Lead Arranger. Nordea Bank and Danske Bank acted as the Coordinators.
Source: Kemira Oyj