Annual Report 1999 - Kemira

Far East. In Denmark, potassium nitrate
production was expanded, and the plant
extension is being continued through a
new investment that is expected to be
completed in the autumn of 2000.
NPK projects in Southeast Asia progressed
according to plans and the plant
of a joint venture in Malesia, in which
Kemira Agro has a 30% holding, started
up in mid-1999. Construction works on
the plant in China continued ahead and
the facility is expected to reach completion
in the autumn of 2000. Kemira Agro
has a 49% interest and Finnfund a 26%
interest in the joint venture in China.
In Finland, Kemira Agro purchased
an 20% holding in the Suomen Rehu animal
feed business, thereby strengthening
the logistics co-operation that has already
been started.
The development programme that
was launched at the beginning of 1998
at Kemira Agro has progressed according
to plans. Its objective is to achieve a
significant improvement in earnings,
which will show up to the full extent in
2001.
KEMIRA PIGMENTS
Kemira Pigments’ net sales rose by 15%
and were EUR 488 million. Average selling
prices for titanium dioxide pigments
during the year were at the previous
year’s level. Selling prices in the September-December
period were about 2%
lower than prices in the May-August period
and prices in the last four months
of 1998.
Sales volumes of titanium dioxide
pigments were 13% higher than they
were a year earlier. The sales volume in
the last four months of the year was 25%
higher than it was in the last four
months of the previous year, a situation
that may be partly attributable to the
precautions taken by customers on the
eve of the new millennium.
Demand was in decline in Europe
and Asia in the previous year, but it
swung to strong growth during 1999,
particularly after the January-April period.
In North America demand remained
good, though in Latin America it was
weak throughout the year.
Changes in the titanium dioxide industry
continued when the American
company Huntsman Chemicals acquired
Tioxide from ICI. Kemira is also peeling
off its plants in the United States and the
Netherlands.
Kemira Pigments’ operating income
was EUR 35 million (22 million in 1998),
or 7% of net sales. Operating income in
the September-December period was
EUR 18 million, as against EUR 10 million
in the previous four month period
and EUR 7 million in the last four month
period of the previous year. A change in
the actuarial assumptions for calculating
the liability of Finnish pension funds resulted
in a non-recurring reversal of
about EUR 3 million in contributions to
the supplementary pension foundation
in the September-December period,
whereas in the previous year the change
resulted in having to book a one-off expense
of the same size.
The debottlenecking project at the
Pori plant was completed according to
plans towards the end of the 1999.
Thereafter the Pori unit’s production capacity
will be 120,000 tonnes a year.
OTHER UNITS
Kemira Metalkat, which manufactures
catalytic converters, reported net sales
growth of 19%, to EUR 36 million. Operating
income was EUR 3.1 million, as
against EUR 1.7 million a year earlier.
Net sales by Kemira Safety, which manufactures
personal protection equipment,
were down 1%, to EUR 14 million. Operating
income was EUR 0.9 million (1.3
million in 1998).
GROUP FINANCIAL PERFORMANCE
The Group’s operating income was EUR
111 million (148 million in 1998), or 4%
of net sales. This figure includes a total
of EUR 28 million of non-recurring net
costs. Income before taxes and minority
interests was 59 million (97 million in
1998). Net financial expenses were EUR
52 million (51 million in 1998). Income
after taxes was EUR 30 million (79 million
in 1998). The effective tax rate rose
from 20% to 47%. The increase in the effective
tax rate was mainly due to the
non-recurring costs booked. As was reported
in the previous year’s financial
statements, taxes in the 1998 income
statement were reduced by an EUR 14
million deferred taxes item which resulted
from a review of the accounting policy
in line with changed IAS rules. The
return on capital invested was 5.9%
(8.3%).
CAPITAL EXPENDITURE
The Group’s capital expenditures totalled
168 million (255 million in 1998),
or 6.7% of net sales. Capital expenditures
were at a clearly lower level than
they were a year earlier because no major
acquisitions were made. Depreciation
on fixed assets amounted to EUR 188
million. Proceeds on the sale of fixed assets
amounted to EUR 18 million (14
million in 1998), whereby net capital expenditures
were 150 million, or 5.9% of
net sales. The Group’s environmental
INVESTOINNIT
CAPITAL EXPENDITURE
% As % of net sales
12
10
euroa EUR
million
300
250
CAPITAL EXPENDITURE BY
BUSINESS AREA
Kemira
Chemicals
29 %
Other
2 %
Kemira
Agro
28 %
EUR
million
1000
800
NET DEBT AND FINANCING
EXPENSES
Net debt
Net financing expenses, % of
liabilities
%
15
12
8
200
600
9
6
150
4
100
400
6
2
0
95 96 97 98 99
50
0
Tikkurila
13 %
Kemira
Pigments
28 %
200
0
95 96 97 98 99
3
0
10