The Kemira Group's net sales in the January-June period of the current year were EUR 1,371 million, slightly exceeding the same period a year earlier (1,364 million). Consolidated operating income in the second quarter was EUR 45 million, almost doubling the operating income for the second quarter last year (26 million). Operating income in the January-June period was EUR 76 million (79 million), or 6% of net sales (6%). Income before taxes and minority interests was EUR 65 million (68 million) and income after taxes was EUR 45 million (43 million). Earnings per share were EUR 0.38 (0.36). Cash flow from the sale of assets was EUR 8.1 million (7.8 million). Cash flow after capital expenditures and the sale of assets was EUR 59 million negative (6.2 million positive in Jan.-June 2002). Per-share cash flow from operations was EUR 0.03 (1.10). Equity per share was EUR 8.87 (8.94 at the end of the previous year) and the gearing ratio was 81% (72% at the end of the previous year).
The average number of the Group's employees in January-June was 10,339 (10,298).
GROUP STRATEGY
Kemira is seeking to be one of the world's top three companies within pulp and paper chemicals as well as water treatment chemicals. The objective for the paint business is to grow to become 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 GrowHow business will be developed as an independent unit that is part of the Group and its cash flow will be partly used to fund the growth of the other units.
PULP & PAPER CHEMICALS
The Pulp & Paper Chemicals unit's second-quarter net sales were EUR 123 million (125 million) and EUR 244 million for the first half of the year, growing by 4% over the previous year (234 million). Sales growth has been slowed down by the low production volumes of its main client, the pulp and paper industry, which continues to suffer from the depressed economy, as well as by the lower dollar. Operating income for the second quarter was EUR 6.5 million (2.5 million) and EUR 16 million for the six month period (11 million), which is a 52% increase and represents a margin of 7% (5%) on net sales.
KEMWATER
Second-quarter net sales of the water treatment chemicals unit, Kemwater, were EUR 47 million, 2% higher than last year (46 million), bringing net sales for the first six months to EUR 90 million (91 million). Operating income for the second quarter was EUR 4.9 million (4.1 million) and for the six month period EUR 9.2 million (8.9 million), giving a margin of 10% (10%).
PAINTS AND COATINGS
Second-quarter net sales in the paint business were EUR 127 million, 6% lower than a year earlier (135 million). Since the start of the year, net sales were nearly the same as last year, EUR 233 million (236 million). Second-quarter operating income was EUR 14 million (15 million) and in the January-June period it reached EUR 20 million (19 million), or 9% of net sales (8%). The savings resulting from combining the operations of Tikkurila and Alcro-Beckers as well as other productivity improvement measures are clearly reflected in reduced fixed costs.
INDUSTRIAL CHEMICALS
The Industrial Chemicals unit is a supplier to the paint, printing ink, detergent, road maintenance, sileage, textile and fine chemicals industries as well as other sectors. The unit's second-quarter net sales were 4% higher than last year at EUR 117 million (112 million). January-June net sales were EUR 217 million (214 million). Operating income for the second quarter was significantly higher than last year at EUR 13 million (4.9 million) and EUR 21 million for the first six months (16 million), even though the weakness of the dollar against the euro had a considerable negative impact. The January-June operating income was 10% of net sales (8%).
GROWHOW
Kemira GrowHow, the plant nutrient business, had net sales in the second quarter of EUR 289 million (315 million), with first-half net sales totalling EUR 632 million, an increase of 1% on the previous year (626 million). Fertilizer sales volumes in the first half of the year rose all in all by about 11% from last year's low level.
GrowHow reported second-quarter operating income of EUR 14 million (11 million) and a first-half figure of EUR 18 million (38 million), 3% of net sales (6%). Operating income includes EUR 7 million from a reversal of the provision made last year. It also includes a non-recurring charge of 1.9 million for the personnel arrangements in Finland.
FULL-YEAR OUTLOOK
The depressed phase in the cycle of the pulp and paper industry is estimated to continue. The Group's geographical presence has strengthened and its product range and scope of services has expanded, particularly following the acquisition of Vinings, Inc. of the USA, which now is being complemented by the acquisition of the Vulcan paper chemicals business. The operating income of pulp and paper chemicals for the full year is expected to improve from the previous year.
Demand is expected to continue developing favourably within water treatment chemicals, and operating income should remain at last year's level or improve.
The demand for paints and coatings is improving as the summer painting season has started after a fairly cold spring. The general slowdown in the economy should not affect demand to any significant degree. Growth is expected to be strongest in Russia. Synergy benefits arising from combining Alcro-Beckers of Sweden with the Kemira Paints and Coatings business together with other productivity improvement measures initiated last year and this year are expected to further improve operating income for the financial year even if there may be some one-time restructuring charges.
The outlook for industrial chemicals remains positive although somewhat cautious. New capacity has been brought on stream, e.g. in sodium percarbonate in Helsingborg, formic acid in Oulu, and titanium dioxide pigments in Pori. The slow global economic development and the weakness of the dollar have affected the titanium dioxide pigment markets, reversing the upward trend in prices. In spite of these developments, the operating income of the industrial chemicals business in 2003 is expected to improve from the previous year.
GrowHow's fertilizer prices have improved as the season has progressed, and the published prices for the new season are significantly higher than last year on the UK and continental markets. On the other hand, overseas exports continue to suffer from the weak dollar against the euro, and the price war combined with the weak dollar in the animal nutrition markets is cutting into profitability. For these reasons, GrowHow's operating income for the full year is expected to fall below last year's level.
The Kemira Group's operating income is expected to improve on last year's operating result before the impact of the one-time impairment. The operational net result is also estimated to improve.
Helsinki 30 July 2003
Board of Directors
All forecasts and estimates mentioned in this report are based on the current judgement of the economic environment and the actual results may be significantly different.
Kemira Oyj
Group Communications
Kari Savolainen
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