Kemira Oyj Ord

and welcome to Kenira's Q3 earnings webcast. My name is Kiira Fröberi, and I'm the head of investor relations at Kenira. We report our Q3 interim reportability in the weekend market environment. Here with me today, I have our president, CEO, Antti Salminen, and our CFO, Rika Streen. our group level strategy, as well as the outlook. After that, Petri will discuss the business performance, and we'll also share some more details on the end of the presentation, before the Q&A. Antti will also give a short introduction to our new CFO, Thomas Makipeska. But now, Antti, please, the test is yours.

Thank you, Kiira, and welcome on my behalf as well. So happy to report here on our strong profitability in weekend market development. And market indeed has been quite stubbornly. We saw that first already in the beginning of the year or at the end of the previous year, hitting the performance of packaging and hygiene solutions business unit impact from the weekend market. The consumers are not consuming. Trade is not flowing globally, so less packaging material is consumed, thus less demand. go into the production of packaging. We mentioned that we see now the end of the weaker economy trickling up the value chain to the pulp for our customers in that area. And now it's visible in Q3 clearly. We have seen a lot of prolonged maintenance that is hitting the fiber essentials unit. and and we've also now started to see the kind of prolonged slow global economy impacting the over industrial activity who run race at any industrial segment especially here translated into less water consumption by industry and fast consumption of our water treatment chemicals in the industrial side of our water business so all these have led to the situation where basically the revenues declined 5% in terms of organic, quite a significant amount of us. We have significant business units. Now in Q3 was hitting all of three of our business units. Nevertheless, we keep the outlook on change as we changed in the Q2. But the good news is that profitability, we maintained the 20% operability. Maybe that performance, which I think kind of comparing to the chemical industry in Europe, comparing to the looking at the invent that we operate in and the decline top line is a good performance. And I'm really thankful for the whole organ for pulling it together. maintained high profitability in backbone of our business, i.e. water solutions unit, but we managed to improve also the profitability in the package and hygiene solutions. Coming both from cost management program or profitability improvement program that we launched in the spring for the package and hygiene solutions. Now, Even if the markets are soft, we continue to invest into our strategy, and the megatrends that are supporting the strategy stay intact. So long-term viability. and growth potential of the fiber economy and the need for clean water. We continue to invest into the execution of strategy, also continue to have a strong balance sheet which enables that. And I will talk later a little bit more about a couple of steps in terms of continuing the strategy execution. The revenues were weak in Q3. ULR had a significant impact, but overall the demand also was weaker. We repeat the unit, so basically this is overall decline in demand that is affecting the top line here. Here we saw decline in volume, as I mentioned, but price is stable, so that is the kind of good news. Sequentially, sales volumes actually increased from Q2. That is mainly driven by the water solutions unit, and Petri will talk more about it later. We saw some decline in sales price. Then, looking at the profitability, which I mentioned, it's fair to say it's on good level. So the 20% of EBITDA margin, we actually are very close to all-time high for Chimera. So really good performance in terms of profitability. Profitability remains strong in water solutions, especially the urban, resilient, steady, profitable backbone of our business. But we managed to improve in packaging and hygiene solutions significantly. The profitability of fiber as a consequence of the clearly declining volumes from the market. This kind of weakness of the market and the weaker demand, of course, puts a lot of pressure on us to focus on profitability improvement, the operational excellence, cost containment, so that we can continue to operate on a good, healthy profitability level. Those actions we have defined, but as we communicated this morning, bring clear program there. And the bottom line, well with that program and some of it are visible in the good which also was helped by the favorable product mix in this quarter. Now we are starting to assess the operating model that we have in packaging and high chain solution and the aim there is to differentiate the service level so that we can better serve key customers that we have introduced faster new innovations to the marketplace and provide better service for our key customers and at the same time optimize cost to serve levels for the more tax on our customer base. We'll start and the impacts of that will be visible in 27. So no impact expected for the last quarter of this year. The earnings came out at 38% per share. And oops, here. As I mentioned, we continue to into our strategy execution trends are there and we are in a really good position to also maybe capitalize on the bigger market environment because big part of our strategy is based on. There's A couple of key cornerstones for our strategy, and I will touch three of them here when I talk about the strategy execution. So first of all, growth significantly in the water business. And there are two subdomains which are really important for this. Micropollutant removal, pharmaceuticals and so forth, microplastic subsegment of the water market, which is developing as we speak. And we have a clear strategy on how do we enter that market. The other part which we have been relatively weak historically is the water services, and that's also water faster than the base business. And we have taken now clear steps regarding entering both of these growth market areas. And then we'll talk a little bit about our kind of progress with renewable chemistry. During Q3, we announced the investment into our site in Helsingborg for reactivate action facility for activated carbon. That is the first activation facility in the whole Nordic market. to enter via the activated carbon service this micropollutant removal. Because activated carbon is the kind of a well-tested pre-invent method for capturing micropollutants and PFAS from raw waters for drinking water. And that's a key part of our work there. but need to amend that with other more specific innovative technologies. So there, CUSP AI, K2K-based startup is of key importance. So we started in June a joint development project to develop new-to-the-world type of adsorbent materials, and we are progressing very well. needs to come up with completely new solutions, very targeted solutions for beef. So these both are on the kind of micro pollutant removal area of the water. Then our earlier announced joint venture, the world leader in supporting us with development of commercial. We announced this JV. We are currently working on the engineering phases ongoing. looking at different engineering options for manufacturing site itself. There is some delay, so unlike we earlier informed that the production would be up and running by the end of 27, it's rather on the side of 28 that we now plan to be up and running. Eight, we have industrial-level volumes available from our industry. several industrial scale test trials with our customers, both in water solutions area and in packaging and hygiene. And many of these application tests actually look very from when we actually have the joint venture manufacturing up and running. We have existing customer base already for those solutions. And then as mentioned, Second area within the water service is one of our key growths is the entry to the, we announced this morning that we closed the transaction on acquiring water engineering United States of America. That's our first significant water service. Water engineering is a water service specialist expertise in boiler and cooling power water treatment, as well as wastewater treatment in industrial facilities, whether it's manufacturing and healthcare industry. They're based out of Nebraska, and they have built a really strong presence in the middle space in U.S., grown quite quickly. This provides us a good platform for future growth, both organically, but also inorganically, because their growth method has largely been a kind of programmatic bolt on an M&A path, and continue growing in that business. Business itself, as I said, the rationale entering that is that it is far growing market than the base water treatment market. Plus it is asset light in terms of BS model. So there's not a consequent significant capex going into maintenance and improvement and production facilities. So our existing product to serve these customers. So there's good cross-selling opportunities with this acquisition. The expected pro forma revenue of the company is north of 60 million US dollars and the purchase as we have communicated was four dollars. So I warmly welcome all the colleagues from the water engineer to the big global Chemera family. I think we will have a great few together. Now then, we have introduced a new slide here. We should be providing a bit more transparency and trackability in terms of our long-term financial targets. Now, it is very clear that we are disappointed with the... in terms of organic growth, short-term on average to grow more than 4% organically a year. Now, clearly the markets have proven to be much softer than we anticipated when we set out this target and communicated in the CMD a year ago. But I still believe that long-term this growth potential is there as the mega, ...growing new domains within the water, so it will provide us accelerators, but clearly the start on that journey has been... slower than we anticipated. Operative EBITDA, we are operating comfortably with the 18 to 21 EBITDA performance range that we communicated as a target and also in terms of return on capital target that we set. That said, of course, the kind of declining trend on both of these is not satisfactory, and we are having diligent actions and programs in place and making sure that we hit these long-term targets as we progress with our strategy. Then the outlook for the rest of the year remains unchanged, so no reason to comment that further, and we will comment in more detail the business-specific performance and other financial ratios. Petri, the floor is yours.

Thank you, Antti. So I'll do, as Antti said, I'll start with a sort of a key point, and I think really Our ability to defend the profitability as well as the PHS business unit profitability improvement are indeed the key in this report. And as I said, acquisition is an important step. So let's – top line is almost an – development is almost an exact repeat from Q2. Forty million decline driven by effect changes, and again, mostly it's the U.S. dollar that has continued to weaken year and year. Organic growth also was negative in Q2. We have been able to maintain prices well, again, considering the weak market environment. Variable costs have been stable throughout the year, so the change is in essence zero. Also, what I think that in essence, we have been able to kill inflation. So the fixed cost is zero. Again, we all know the salary inflation ongoing. There's an inflation in many other areas of the way, how we have been able to defend profitability. This is very good. obviously not be happy about the top line development or the absolute level of profit generated. Fact from the variable code and is really flat. And as you can see, almost for the last four quarters, it has been pretty much flat. So now the force is really much more right to period between 21 and 23, when really a lot of our profitability was how can we defend against inflation, how we are coping with inflation and how we are passing the inflatory raw material. Now it's really about volume. Again, I'll start business unit comments with water solutions. So, excluding the FX impact decline against the pretty strong last compare. You notice that... In the comparison period, we had vibrant organic growth, so it was a stronger comparison period. The water treatment markets. Antti already mentioned that the urban market continues to be really strong. And even in this world, the business unit is declining. Urban market is stable, and it continues up. EMEA is more than offsetting the small decline in America's urban market. Then the weakness was on the there, like Antti was talking about. It's both the industrial activity, the weakness in it, But it's also the fact that we have this one falling customer compared to a year ago. So initially, from Q2 to Q3, both volumes and revenues increased despite less FX impact. Very strong at 23.1%, very close to last year's level. Packaging and hygiene solution. So challenging market continued or recovered. There's a lot of underlying or behind the factor impacting the business unit. But I think the key point is it wasn't actually getting any worse in Q3. Volumes, essence, flat, and sequent even increased modestly, remodestly. The market looked a bit more post-Americas, and there was positive development in APAC as well. However, weakness continued in Europe. In a map of our customers' reports yesterday, which were sort of indicating that. Year in year, we saw some price decline, but sequentially prices were flat. 13.6%. which is actually quite a sequential improvement below 10% in Q2. This was driven by cost containment topics, like Antti was talking about in Q3. So that helped there as well. And also, I'd like to remind that we have an extended maintenance in one of our key facilities in China, In Q2, Q2 results even more. Regionally, both Americas and America are at 15% or above, so diluting the overall business unit margin. And continue those profitability improvements until we talk to business partners business model change that we will be implementing now. And, again, this implementation will take well through to the next year. Market was weak. And we updated business assumptions. in Q2, and then we highlighted that we are a CPAP industry, and indeed, this is what happened. So the market, the softness was really driven by the Nordics softness here. Market related downtime to our customers. Volumes declined here and sequentially. was prices were higher on year. However, this area we did see pressure on variable cost help the market either. We do have some base goals in our portfolio, caustic soda, sulfuric acid. And some of the global market price of these products were also declined that depressed profitability more. Now I move to balance sheet. Again, not a whole change in our balance sheet. Exactly year-end level and approximately at the same level as in June of 2025. The third quarter, which is noteworthy, is that we implemented or started our share buyback program to buy back almost 40 million of our shares during the quarter. A reminder, this program, when it was approved and initiated, it set a maximum of 5 million shares that we will buy back or 100 million. current level, which is of course limited by our daily liquidity, we will be hitting the end of the program around the year, and so maybe in December, maybe so that at the current level looks like. And Antti already showed the trend reports on return on capital, and I and regarding our fee markets. So, yes, the lower EBIT, which is the result of the weaker market impacting our capital efficiency. Cash flow improvement. We did have a networking capital decline. I think I mentioned in Q2 that we had a little bit of a buildup in networking capital during Q3. I'd like to remind that typically our cash flow is more weighted in half of the year, particularly Q4, as you can see from the figures which we have here on the quarterly breakdown. So I hope to expect to see that sort of a seasonal pattern this year as well. to our capex guidance. We expect our capex to increase over last year. So again, you do the math, you'll see that the capex will increase significantly from the quarterly run rate. With that, I'll stop. Antti will be able to announce my successor. So, I'm today ready to go. Thank you.