Kemira's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Kemira Oyj (KMRAF.PK)

Q1 2012 Earnings Call

April 24, 2012 5:30 AM ET

Executives

Tero Huovinen – IR

Wolfgang Büchele – President and CEO

Jyrki Mäki-Kala – CFO

Analysts

Jussi Uskola – Deutsche Bank

Markku Järvinen – Evli

Rauli Juva – Nordea

Martin Evans – JP Morgan

Carl Frejborg – Carnegie

Presentation

Tero Huovinen

Welcome to Kemira’s First Quarter 2012 Results Conference. My name is Tero Huovinen. I am responsible for Investor Relations.

We will start with the presentation by Kemira’s President and CEO, Wolfgang Büchele followed by a presentation by CFO, Jyrki Mäki-Kala. After the presentations, we will have time for question.

With that I will leave the floor to Wolfgang, please.

Wolfgang Büchele

Good morning, ladies and gentlemen. It’s my first presentation of a quarterly result to you and in a nutshell Kemira in Q1 2011 was performing slightly below expectations.

Paper and Oil and Mining were performing well. The M&I market was weaker than anticipated so, M&I was well below our expectation. And ChemSolutions was slightly falling short due to a too warm weather so the deicing season was lower than our anticipation. That is in a nutshell where we are standing; details will be later on shown by Jyrki Mäki-Kala, our CFO.

I want to give you now a little bit of guidance what based on these results our plans are, where we are heading and what we are going to do. Our water strategy is a unique strategy in the industry and this is something we wanted to keep it that way. We want to further foster that strategy and we want to develop that. We also have employees, which have a new unique vision how this water strategy can be developed and that is a real competitive advantage and a differentiator in the market which we want to embark on.

Based on that, we want to focus on three strategic priorities in the near future. The first is to improve our internal efficiency. Kemira clearly has quite some potential to further streamline and optimize the work flows and the way we are doing our business and that is something we will now start to analyze and to looking into.

We also want to substantially strengthen our position in the emerging markets. As you all know and as you might recall from previous presentations, we are currently very strong in our home market Europe. We have a good position in the North American market, but we are comparably weak still in APAC and in South America and we want to address that by an accelerating growth there.

And thirdly, we want to further sharpen our strategy in a way that we get to a proper roadmap including transferable resources in order to in a faster and more accelerating way to develop our water strategy and ultimately our position.

So these are the three pillars which we want to deal with in the near future and want to align our organization along and towards these three pillars.

Ultimately, this is focusing on achieving E10 which we have talked about for quite some while in an accelerated way by reducing the business complexity on the one hand, but at the same time embarking on profitable growth. And you might recall that our growth pattern in the most recent quarters was slightly below our own objectives, and we want to change and we want to address that.

Why is APAC and to a certain extent, South America so relevant. If you look to the distribution of the order market, which accounts for some €28 billion in 2010. You already today see that the European part is smaller than APAC. So even in 2010, APAC accounts for a bigger order market. And going forward, the growth in APAC is substantially higher than the growth in Europe.

So in other words, the relevance of the Asian market for Water is growing year-on-year. If you mirror that to Kemira’s actual sales distribution, you will see that APAC currently accounts for unfortunately just 6% of our sales. So we are underrepresented in the Asian market and we take that very serious. So we are now looking with our Asian organization, how to accelerate our position building in that market, which is of major relevance going further without of course sacrificing our excellent positions in Europe and the United States.

Obviously when you talk Asia, you talk different challenges, we have mega cities, which have totally different water infrastructure in comparison to a country like Finland or even more densely populated countries in Europe, like France and Germany.

We have mega cities with up to 40 million people which simply require different approaches than we currently have them and we currently supply them in Europe and we will develop additional solutions, tailor-made solution for the specific markets via our SWEET project, via our R&D lab in Shanghai, where we are also in the future will devote more time and resources to cooperate with local universities in order to tap into the local prime pool, when it comes to R&D.

We also have topics like, lake restoration, which is not that much an issue in Europe and in United States. We have already some good experience in South America, where we are currently engaged in lake restoration projects. But this is getting a very big issue also in Asia in particular in the People’s Republic of China and we want to benefit from this upcoming and developing market.

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