Kemira Group (
Q3 2010 Earnings Call
October 28, 2010 1:30 am ET
Tero Huovinen - Director of IR
Jukka Ryhanen - Treasurer
Jyrki Mäki-Kala -CFO
Harri Kerminen - President and CEO
Peter Mackey - Morgan Stanley
Martin Evans - JPMorgan Cazenove
Mikael Doepel - Handelsbanken Capital Markets
Welcome to the Kemira Third Quarter Result Analyst Conference Call. At this time, all participants are in listen-only mode until we conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions). And to remind you, this conference call is being recorded.
I would now like to hand over to the Tero Huovinen, Head of Investor Relations. Please begin your meeting and I’ll be standing by.
Thank you, operator. Welcome to Kemira’s Third Quarter Analyst Conference Call. My name is Tero Huovinen and I’m the Head of Investor Relations. With me here today, I have our Treasurer, Jukka Ryhanen; our CFO, Mr. Jyrki Mäki-Kala; and our President and CEO Harri Kerminen who will present Q3 results. And after that presentation, you have a possibility to ask some questions. So, please, Harri start the presentation.
Thank you, very much Tero Huo. Good afternoon everybody. I am Harri Kerminen. I will start saying that we continued with very solid performance. We have seen growth particularly in all segments and I think that we are in a good way both operations and financial part as well.
Before I will say a couple of words about this Q3, results and also some items from the first nine months of this year, I will try to remind you that our strategy is to really focused on water chemistry and if we go to slide number 4: where we can see a couple of points of that, so why we are at Kemira focusing on water.
The simple reason is that we have competency and long history on water and we see that demand is increasing significantly in some 20 years, 50% availability and we will see a major gap of 40% between demand and supply in 2013. It seems that there are lot options for Kemira but also for it ability to develop new technologies.
Also just to remand you is that Kemira water business is not only municipal water treatment, cottage, the bigger potential is even in industrial water treatment. From Kemira’s point of view we see this as a potential from water intensive industries being 80% whereas municipalities offer 20% market potential.
So municipal and industries are important for Kemira. At the moment we are very looking at the industries serving us, Paper industry, Oil and Gas, Mining, but we are looking at also entering other industrial segments.
During Q3 we have done many strategic actions to implement a strategy and I will give a couple of examples. So last spring we established with Finnish Research Institute, VTT a center of water efficiency excellence here in Finland. However, there are many universities like University of Alberta in Canada and Nanyang Technical University in Singapore that have joined the program, and this gives us a lot of have of opportunities to develop new solutions and products for water intensive industries.
We closed an acquisition in the U.K. for Oil and Gas, Water Treatment Chemicals. We also have established a partnership with Outotec, which is a major mining, engineering and constructing company. That opens us new possibilities to develop business. We also have announced an investment to build a production hub in Nanjing in China for water treatment chemicals.
We also have signed a JV agreement with an Indian company called IVRCL. That is a major engineering and construction company and water treatment area and gives us also new possibilities to grow and penetrate the Indian market that is very lucrative for Kemira.
We have closed one coagulant acquisition called Water Elements in North America, we can see more as a more as a tactical move to strengthen market position serving municipalities in North America. And we also can say we have basically completed our fixed savings program with €60 million that we had started two years ago.
Also I can say that during these two years, we have been running this new project we have developed highly disciplined organization in Kemira. We have put lots of effort of building new management systems according to a strategy and structure and we have lots of chances in customer and product mix area to improve profitability.
And now about this Q3, we’ll start slide 8 saying first that we had a very solid third quarter. Revenue increased by 14%, organic growth being 7%. I think high that’s a good number also currency net interest rate had a positive impact, EBIT increased by €4 million, EBIT margin increased to 7.7%. It also had improved from Q2 result in profitability gearing modest level of 43%. So getting better all the time and earnings per share improved by 35%. And then if you look at the first nine months period during the year total revenue increase by 10%, organic growth being 5%, especially Paper and Oil and Mining segments improved and had a nice improvement in many ways.
EBIT at the group level rose 32% and EBIT margin rose to 7.6%. Net profit before taxes improved even much more by 93% and there are two main reasons for good improvement one is lower interest cost, but it’s also worth mentioning that perhaps you remember that we established in September 2008 a JV with a American company Rockwood concerning Titanium Dioxide business. In that JV Kemira had 39% share and we are not reporting that in net sales and EBIT but certainly it will impact in net profit.