Release Date: July 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kemira Oyj (KOYJF, Financial) reported solid performance in Q2 2024 with steady volume growth and margin improvement.
- The company saw a significant recovery in the pulp and paper segment, with a 10% year-on-year volume increase.
- Customer satisfaction and employee engagement scores reached all-time highs, indicating strong internal and external support.
- Kemira Oyj (KOYJF) made strategic investments in growth areas, including expanding coagulant capacity in Spain and entering the micropollutants removal market.
- The company maintained strong cash flows and defended its margins well despite a decline in raw material costs.
Negative Points
- The pulp and paper segment experienced seasonal weakness due to maintenance shutdowns, impacting Q2 results.
- Sales prices declined by 6% year-on-year, influenced by lower caustic and electricity prices.
- The closure of the Argentina legal entity resulted in a negative impact of approximately EUR7 million on EPS.
- Despite the positive outlook, there is uncertainty about the continuation of market recovery in the pulp and paper segment.
- The company faces ongoing challenges in maintaining revenue growth amidst fluctuating raw material costs and market conditions.
Q & A Highlights
Q: Can you quantify the effect from the annual maintenance breaks in the pulp and paper segment?
A: We don't give a specific quantification, but the impact is in the single millions range. The maintenance breaks are more consolidated now, and electricity pricing in the Nordics has introduced new seasonality.
Q: Why did you upgrade your guidance a month ago instead of waiting until today?
A: We are required to update guidance when our forecasts exceed previous guidance. Additionally, some analysts misunderstood the underlying profitability rhythm, so it was necessary to clarify.
Q: Is the 10% volume growth in the pulp and paper segment due to underlying demand or restocking?
A: The growth is mostly due to market recovery, with some restocking. We are optimistic about continued recovery, but time will tell.
Q: What should we expect for sales prices going forward?
A: It's more important to focus on margin development rather than price levels. We aim to maintain margins regardless of raw material price fluctuations.
Q: Are you focusing on bolt-on acquisitions for growth?
A: Yes, we prioritize small to mid-sized bolt-on acquisitions for easier management and lower risks, but we are also open to more sizable targets.
Q: What gives you confidence for higher revenue growth in late 2024 and early 2025?
A: Adjusted for the oil and gas divestments, our underlying business is growing in both volumes and profits. We are also exploring opportunities for faster growth.
Q: What kind of M&A targets are you looking for?
A: We focus on synergistic businesses in the water area or those that expand our technological capabilities. We are looking for both small and sizable targets that align with our strategic growth priorities.
Q: Can you provide more details on the activated carbon market for water treatment?
A: The activated carbon market for water treatment is growing at 7-8% annually, significantly higher than our traditional markets. This is a key growth area for us.
Q: How do you handle seasonality in the pulp and paper segment?
A: The seasonality is influenced by electricity pricing and maintenance shutdowns. Q2 is typically heavier in maintenance, but Q3 should not be exceptional in this regard.
Q: What was the impact of closing the legal entity in Argentina on EBITDA?
A: The impact was EUR2.5 million on operating costs and about EUR4 million below the line, spread between finance and tax items.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
