Annual Report 1999 - Kemira

KEMIRA CHEMICALS
EUR
million
800
600
400
200
0
MANAGEMENT
President: Yrjö Sipilä
Pulp & Paper Chemicals:
Juhani Lindholm
Kemwater: Lennart Johansson
Industrial Chemicals:
Harri Kerminen
Yrjö
Sipilä
NET SALES
Net sales
Operating margin, %
95 96 97 98 99
CAPITAL EXPENDITURE
95 96 97 98 99
NET SALES BY BUSINESS UNIT
Fine
Chemicals 4 %
Industrial
Chemicals
34 %
%
20
15
10
5
0
EUR
million
150
120
90
60
30
Pulp & Paper
Chemicals
43 %
Kemwater 19 %
0
NET SALES AND PROFITS UP
It was a mixed year for Kemira Chemicals.
There was wide variation among
different products and different market
areas: some products had good sales,
whereas others faced conditions that
were even tantamount to a price war.
The chemical industry’s difficulties in
the wake of the Asian crisis continued
in many fields. Within the pulp and
paper industry, which is our most important
customer group, business was
depressed in the early months of the
year, but by mid-year the demand for
paper products and the price of pulp
recovered. In the latter part of the year
an upswing was already under way.
Kemira Chemicals continued its
brisk growth in 1999. Net sales rose by
11% and were EUR 697 million (1998:
EUR 630 million). Operating income
was up 11% to EUR 83 million (EUR
75 million).
All the strategic business units increased
their sales. Net sales of the
Pulp and Paper Chemicals unit rose by
18% and were EUR 326 million. Kemwater’s
net sales were up 7% to EUR
145 million. Industrial Chemicals’ net
sales were EUR 256 million, an increase
of 4%. Kemira Fine Chemicals
Oy reported net sales of EUR 30 million,
up 15%.
A LARGELY GOOD MARKET TREND
Pulp & Paper Chemicals. The rise in
the rate of capacity utilization at pulp
and paper mills in the latter half of the
year showed up quickly in the sales
volumes of the Pulp & Paper Chemicals
unit.
The market situation for hydrogen
peroxide varied from place to place.
In Europe and Asia there was marginal
growth, but in the United States and
Canada it was quite brisk. This was
due mainly to the fact that the American
pulp industry went over to ECF
bleaching and it was also attributable
to the rise in the level of mechanical
pulp bleaching. The price level of hydrogen
peroxide was relatively stable
and slightly rising.
Kemwater. The market for water
treatment chemicals developed in line
with expectations. Growth continued
in eastern and southern Europe. The
situation in the developing countries
varied according to the economic situation
of each country. In Asia the situation
showed slight signs of a rebound,
but a recovery to pre-crisis levels
still does not seem to have taken
place. The Chinese market was the
most buoyant. In certain areas of the
established markets in Europe there
were price pressures that affected the
result of the Kemwater unit. Russia’s
exports have not yet recovered to the
level preceding the devaluation, but
signs of a revival can be seen there,
too.
Industrial Chemicals. The price of
phosphoric acid and demand for the
product held steady. The appreciation
against the euro of the United States
dollar, which is used as the pricing
currency for phosphoric acid, increased
the phosphoric acid unit’s
margin, though it was burdened by an
extensive shutdown for repairs. Value
added products made from phosphoric
acid - feed phosphates and detergent
phosphates - faced continuing tough
competition, resulting in a higher cost
in dollars of phosphoric acid. It was
difficult for Industrial Chemicals to factor
this increase into prices.
The sodium percarbonate plant
that was completed in Helsingborg,
Sweden, in the previous year operated
according to expectations and its
ECOX product has been well received
by customers. The sales outlook for
KEMIRA CHEMICALS
EUR million 1999 1998 1997 1996 1995
Net sales 697 630 582 520 472
Cost of sales –558 –507 –462 –407 –371
Depreciation –56 –48 –45 –42 –38
Operating income 83 75 75 71 63
Net financing expenses –24 –19 –17 –20 –27
Income before extraordinary items 59 56 58 51 36
Capital invested (average) 596 524 453 415 405
Return on capital invested % 13 14 17 18 16
Capital expenditure 56 126 86 72 33
Personnel (average) 3,138 3,114 2,845 2,283 2,251
42