Kemira Group net sales up 9%

Aug. 4, 2004
In the quarter ending June 30, the Kemira Group had net sales of euro 730 million (1 euro = US$1.20), an increase of 9% on the previous year. The rise was due largely to acquisitions made in the latter half of 2003, including that of Kemiron, of Bartow, FL.

HELSINKI, Finland, Aug. 3, 2004 ( -- In the quarter ending June 30, the Kemira Group had net sales of euro 730 million (1 euro = US$1.20), an increase of 9% on the previous year. The rise was due largely to acquisitions made in the latter half of 2003, including that of Kemiron, of Bartow, FL.

Operating income was euro 55 million, up 17% from a year earlier. Profit before taxes was euro 51 million, earnings per share euro 0.29 and per-share cash flow from operations euro 0.74. Ecocat, which manufactures catalytic converters, was divested in the second quarter.

The Group's net sales in the prior six month period were euro 1,447 million, up 6% on the same period a year earlier. Operating income was euro 109 million, representing 8% of net sales . All the strategic business units increased their operating income.

Income before taxes and minority interest in the January-June period was euro 94 million, an increase of 32% on the figure a year earlier. The result includes capital gains on the sale of assets of euro 18 million. Income after taxes rose by 27% to euro 62 million. Earnings per share were euro 0.52 . The return on capital employed was 9%. Cash flow after capital expenditures was euro 54 million positive compared to euro 59 million negative a year earlier.

The number of the Group's employees at the end of June was 10,985 (10,839), the increase coming mainly from acquisitions made in the late summer 2003.

Restructuring for improved profitability
Kemira is strengthening its four main business areas through organic growth and acquisitions. These growth areas are pulp and paper chemicals, water treatment chemicals (Kemwater), paints and coatings and industrial chemicals. For the fifth strategic business unit, GrowHow, Kemira is presently studying the possibility of listing the unit on the Helsinki stock exchanges. The time of the listing depends on the market situation and, according to preliminary plans, could be realized during the fall at the earliest.

Divestments of non-core businesses and assets were made during the spring and summer. In April Kemira sold Ecocat Oy to Finnish Eqvitec Partners Oy. Right in the early part of the year, Kemira sold the Ecocat subsidiary, Metpela Oy, a manufacturer of exhaust pipes.

At the start of July, Kemira signed an agreement on selling its shares in Kemira Fine Chemicals Oy to 3i, a leading European venture capital company. The sales price is over euro 70 million and the transaction is subject to approval by the competition authorities.

Kemira is presently also continuing negotiations of the sale of Industrial Chemicals' calcium chloride business to Tetra Inc. of the United States.

Kemira and PIC Engineering Oyj have agreed on a transaction whereby Kemira will sell the entire shares outstanding in Kemira Engineering Oy to PIC Engineering Oyj. Kemira Engineering Oy is the Group's internal engineering office, which serves the strategic business units in designing and implementing capital expenditure projects. Kemira Engineering has a staff of about 70 employees.

Kemira has reduced the Group's capital employed by divesting, during the spring, other non-core assets as well.

The fertilizer plant in Fredericia, Denmark, was closed at the end of July. Negotiations with the personnel were seen to completion in May and the winding up of operations will mean closing down all manufacturing operations at the site as well as about 300 redundancies. In future, Fredericia will serve as a GrowHow warehouse and distribution centre for Danish customers.

All strategic business units have prepared plans to increase capital efficiency and improve profitability. The profitability-boosting programmes launched in 2003 have been continued in line with plans.

Full-year outlook
For pulp and paper chemicals, the low business cycle in the client industry is forecast to slowly improve towards the end of the year. Recently there have been some encouraging messages coming from client sectors. Following the acquisitions made last year, the unit has strengthened its geographical presence and expanded its portfolio of products and services, especially in North America. Pulp & Paper Chemicals' full-year net sales are expected to grow. Despite tough competition, operating income is expected to be at the same level as last year, when it included a non-recurring gain of euro 7.7 million.

Demand for water treatment chemicals is expected to show further favorable development. The rise in raw material prices will partially be offset by the use of alternative raw materials, growing sales and better selling prices. Kemwater's net sales and operating income are thus estimated to improve on last year.

The present units of Industrial Chemicals are expected to post higher net sales than they did a year ago. Prices of titanium dioxide pigments have been lower than they were last year. A seasonal pick-up in demand is nevertheless clearly apparent, and prices too are expected to strengthen. Supply has contracted following the closure of manufacturing capacity by certain producers.

The second half of the year is expected to be better than the first half for the titanium dioxide unit. Industrial Chemicals is expected to report better operating income than it did last year. The completion and timing of the divestment of the Fine Chemicals and Calcium Chloride units will have a major impact on Industrial Chemicals' full-year net sales and operating income.

Sales of paints and coatings are expected to be at last year's level. Sales in Russia and the Baltic countries will continue to grow, with an emphasis on locally produced paints, especially in Russia. Earnings will be lifted as efficiency-boosting and synergy benefits continue, and operating income is expected to improve compared with last year.

Prices of GrowHow's fertilizers are expected to continue firm. Grain stocks are at an exceptionally low level globally, supporting the price of grain and helping to maintain a healthy price level for fertilizers. GrowHow's net sales are estimated to remain at last year's level while operating income is expected to improve on last year despite the exceptional costs resulting from production shutdowns. These exceptional costs will still be incurred at one nitric acid plant in Great Britain in July-September. The possibilities of listing GrowHow are being studied.

The Kemira Group's net sales, operating income and net income are expected to improve compared with the results in 2003. The ongoing divestments of businesses and especially the possible spin-off of GrowHow from the Kemira Group will have, if and when they are realized, an essential impact on the net sales, net income, cash flow and balance sheet which the Group posts for the current year.


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