KEMIRA'S EARNINGS IN 2002 FALL SHORT OF THE PREVIOUS YEAR

 

- Net sales: EUR 2,612 million (2001: EUR 2,454 million)

- Operating income of EUR 45 million (144 million) includes EUR 78 million of write-downs for Agro

- Income after financial items: EUR 16 million (113 million)

- Net income for the financial year: EUR 8.2 million (70 million). Earnings per share EUR 0.07 (0.58).

- Proposed dividend: EUR 0.30 per share (0.30). Cash flow per share: EUR 2.45 (1,03)

 

Despite the slowdown in growth in 2002, the Kemira Group's pulp and paper as well as water treatment chemicals and paints businesses succeeded in improving their earnings from operations. In the Pulp & Paper Chemicals unit this was thanks to the acquisition which was  made at the beginning of February of last year. The effect of the recession showed up particularly in Industrial Chemicals' sales of titanium dioxide pigments and in the low yield on pension fund investments, which raised pension expenses.

 

The spin-off of Agro did not go through. Development of its operations is being continued as an independent unit that is part of the Kemira Group. Agro made sizeable non-cash write-downs on assets.

 

 

 

Consolidated net sales increased by 6 per cent on the previous year and were EUR 2,612 million (2,454 million). Operating income was EUR 45 million (144), representing 2% of net sales (6%). Shares in the earnings of associated companies amounted to a total credit to income of EUR 5.5 million. The Group posted an operating loss in October-December of EUR 60 million (operating income of 17 million). The last quarter was burdened by Agro's exceptional non-cash write-downs totalling 78 million. Full-year operating income includes a total of EUR 11 million of other non-recurring business reorganization expenses that are discussed below.

 

In addition, the operating result was burdened by a further increase in the contributions to the Group's Finnish pension funds as a consequence of weak investment yields in a depressed market. In the last quarter the market revived somewhat, which meant that the situation improved compared with what was forecast in the third-quarter interim report. Contributions over the full year amounted to EUR 43 million, an increase of about EUR 6.5 million on the figure a year earlier.

 

Income before taxes and minority interests declined to EUR 16 million from EUR 113 million a year ago. Net of the non-recurring expenses for Agro, the figure was EUR 94 million. Income after taxes was EUR 8.2 million (70 million). Earnings per share were EUR 0.07 (0.58) and stripping out the write-down they were EUR 0.61. About 82% of the Group's net sales came from outside Finland.

 

The return on equity was 1% (6%). The cash flow return on capital invested was 15% (7%).

 

Cash flow after capital expenditures and income from the disposal of assets was EUR 67 million (146 million negative). Per-share cash flow from operations was EUR 2.45 (1.03). Equity per share was EUR 8.94 (9.35) and gearing was 72% (61%).

 

Although net income for the past financial year was weak, mainly as a consequence of non-recurring charges, the Group's cash flow was very strong, and the Board of Directors believes that the business areas will be on an upward trend in the years ahead. Accordingly, the Board of Directors is proposing that the dividend to be paid for 2002 be EUR 0.30 per share (0.30), or a total dividend payout of EUR 35.5 million.

 

DEVELOPMENT OF THE BUSINESS AREAS

 

In accordance with its strategy that was confirmed in February 2002, Kemira is stepping up its growth in the company's core business areas. Within pulp and paper chemicals as well as water treatment chemicals, the company is seeking to be one of the world's top three companies. This will be accomplished mainly through M&A arrangements. The objective for the paint business is to grow into one of the leading European companies, with a focus on the Baltic Rim operating environment. The industrial chemicals business will be developed by drawing on its present - largely organic - growth potential.
 
The options for decoupling the entire Kemira Agro business from the Group have been explored in depth. A number of different alternatives have been considered, ranging from a divestment of the Agro business to spinning it off together with an industrial partner or alone. In the present market situation, when Agro's business cycle is judged to be at its weakest in 2003, the spin-off could not be accomplished in a manner that would increase shareholder value. Because at the same time there can be seen in Agro's market certain positive factors which, if they materialize, will lead to an upswing, the Board of Directors has decided to hault the active measures aimed at decoupling Agro from the Kemira Group. The focus of operations will move to devoloping Agro's competitiveness further as an independent unit, whilst strengthening its own identity.

 

 

The full report including tables can be downloaded from the enclosed link.