Kemira closes Blankophor GmbH & Co. KG (German Catec GmbH)

Kemira Oyj has on September 30, 2010, closed Blankophor GmbH & Co. KG (German Catec GmbH) following the deal announced on June 23, 2010.

Kemira sold its global Fluorescent Whitening Agents (FWAs) business to Blankophor. The parties have agreed not to disclose the transaction price.

The traditional European, high-cost manufacturers of optical brightening agents (OBA) or FWAs continue to struggle as these commodities are easy to source form Indian and Chinese producers at similar quality but much lower price.

Kemira sells its global FWA business

Reported in the press this morning:

Kemira Oyj and German Catec GmbH financially supported by Fengler Beteiligungs GmbH have signed a contract, according to which Kemira sells its global Fluorescent Whitening Agents (FWAs) business to Catec. FWAs improve the whiteness and brightness of paper. The deal covers a production plant in Leverkusen, Germany, the global FWA sales network and the associated support functions. The FWA business and its staff of about 100 persons will be transferred to the new owner once the companies have closed the transaction in August 2010.

The transaction does not have any significant impact on Kemira's financial figures, and the parties have agreed not to disclose the transaction price.

"Kemira is focusing according to its strategy on products and services that enhance the water quality and quantity management in the water intensive industries such as pulp and paper industry. Exiting FWA business is in line with our strategy to enhance the product lines which are common for all our segments and on which we are building our competitiveness", states Petri Helsky, head of Paper segment.

FWAs or OBAs are widely used in the paper industry for producing white paper. A low-margin, commodity business where the major companies, BASF (Ciba), Clariant and Kemira have struggled to compete against quality market entrants from China and India.

Kemira's paper chemicals business struggles on

Kemira announced their first half 2009 results - as is the norm for this sector at the present time, sales decreased - Kemira's overall sales decreased by 5% for the period April-June, 2009 - as customer demand decreased.

For the paper business its seems to be a trend to using hyperbole (eg Clariant's use of the word MASSIVE) - For Kemira, 'The paper segment's revenue in April-June shrank by 8% to EUR221.6 million as demand in customer industries PLUMMETED.'

If interested in the detail, see the Kemira web site. What is refreshing about Kemira is that their business is transparent and unlike some companies (eg Clariant, BASF/Ciba, Ashland) it is possible to see exactly how their paper chemicals business is performing.

Kemira sales and profit down in 1Q09 - paper chemicals struggling

Kemira posted a first quarter pre-tax profit of EUR8 mio, down from EUR22 mio a year ago.  Sales fell from EUR684 million a year ago to EUR609 million.

Sales of pulp and paper chemicals declined from EUR247.7 mio a year ago to EUR225 mio and EBITDA fell 21% to EUR19.8 (8.8% of sales).  The reasons given for the poor performance were falling customer demand, especially in the 'traditional' markets of North America and Europe, linked to the global economic slow-down.  There was a positive currency effect of EUR2mio.

There was some mention of the cost saving projects which Kemira has undertaken such as temporary shout downs in production, closure of the AKD wax production in Vaasa, Finland (March 2009), in addition to the 6 production facilities which have been shut in North America in the last 6 years and the planned closure of the polymer production unit in Colombus, Ohio.

As the BASF acquisition of Ciba takes shape it will be interesting to see whether Kemira adapts its business model to gain an advantage - if Kemira wants to increase the size of its pulp and paper buiness to match that of the new BASF, there are some smaller specialist which could be acquired and help in the further, needed consolidation of the Europen paper chemicals industry.

Deatils of the Kemira performance in the first quarter of 2009 are available on their web site.

Kemira Pulp&Paper - business slows in 2008

The Kemira pulp and paper chemicals business slowed towards the end of the year, but the results were not as bad as expected.  

Revenue in the last quarter of 2008 increased by 2% (EUR 258.3 million) and by 1.4% for the whole year (EUR1,057.7).  

There was a decrease in operating profit as a result of lower sales volumes and higher raw material, freight and energy costs - not to mention the 'one-off' cost of their cost-savings programme!  The operating profit (excluding non-recurring items) in the last quarter of 2008 decreased to EUR9.4 million from EUR12.3 million in the same period of 2007.  For the year, profit decreased to EUR50.4 million (4.8% of sales) from EUR79.8 (7.7% of sales) in 2007.

The full results and details are available on Kemira's web site.

Can you trust market data?

It was interesting to read a recent advert for a study by Frost & Sullivan.  The title is, ' European Pulp & Paper Chemicals - is Consolidation the Response to a Mature Market?  What is striking is the market data shown for the European paper chemicals industry - there are only three significant players in a chart that is described as, '..... the market shares of the leading companies in the European pulp and paper manufacturing process chemicals market in 2008.

The segmentation of the pulp and paper chemicals market shows a complete lack of market knowledge and then to suggest that Kemira, Eka Chmeicals and Solvay have 85% of the process chemicals market is claptrap.  Further comments could be made on the report but it it not worth the effort.......... when the data are suspect, how can one trust the conclusions.  

Kemira find further cost-cutting opportunities - Happy Christmas!

Kemira sent its employees home for the Christmas holidays with yet a further cost cutting and restructuring announcement.  In the middle of 2008 a cost-saving programme was announced with a target of saving EUR 50 million.  Now, Kemira has pulled another EUR 10 million out of the bag.  The additional savings are expected to be realised in 2009 and 2010.

In the announcement it is stated that Kemira has closed and will further close production capacity of its low-profitability polymer and paper chemicals.  No specific details were given.

Even "The Chemical Company", BASF finds the going tough - what of the rest?

BASF announced that it will temporarily close 80 plants world-wide and cut production at a 100 more in a move which will affect over 20,000 workers over the next two months.  In effect, BASF will reduce output by 25%.

Three weeks ago, BASF said it was coping with declining demand and that 2008 sales would top last year's EUR 97.5 bn with operating earnings matching 2007 (EUR 7.32 bn).  All has changed.  BASF has now issued a profits warning for this year. 

In the view of the FT and industry experts, the move by BASF is a pre-cursor to a huge bout of restructuring among Europen companies, including job cuts and factory closures.  

Where does this leave the paper chemicals industry?  

For the stong companies:

• BASF is in the process of acquiring Ciba on the wave of their gloomy announcements.  So, tough times for Ciba under their new masters.  
• Kemira - has recently announced significant lay-offs and a restructuring programme.
• Ashland and Hercules are well placed to take advantage of the current climate, further  investing in Europe would be folly, but they could help in the market consolidation.  However, a recent Forbes.com article puts Ashland in a different light - Trashland!
• Dow Chemical - announced last week that a fall in demand would force them into a restructuring before year end.

Then there are the question marks:

• Nalco - quiet at the moment but in need of a freshening up.  Their cost-cutting waves have left them rather thin on the ground.  Rumours abound.
• Clariant was struggling before the economic crisis - time to make some significant strategic and tactical moves? Don't hold your breath, but desperate times require desperate measures.  The share price is moving close to being considered a 'penny stock'.  Their leading global paper group (technical and manufacturing) in the UK is on schedule to shut before year end in what appears to be an attempt to protect their high-cost Swiss base.  A good move when the Swiss franc gains against sterling?!
• Eka Chemicals - solid in their protective Akzo Nobel net but again, the economic crisis may force some moves affecting paper chemicals which is not core business for the mighty Akzo.  The inability to sell National Starch has been a recent issue.
• Buckman - recently there has been news that this smaller company has struggled, but it is not beyond them to find an innovative way forward.  They are more agile than the larger companies.

As we have stated many times in this weblog, the Chinese paper chemical companies are well positioned to take advantage of the Chinese growth market and further squeeze the sluggish European and North American manufacturers, cutting down their options to show any future growth.

Difficult times, for sure, but there are opportunities for the sharp strategic thinkers.

Kemira Acquire Brazillian Nheel Química

Kemira has announced the acquisition of the Brazillian water treatment chemical company, Nheel Quimica to strengthen their position in Latin America.  Nheel Quimica is the second largest producer of iron salts and the largest aluminium salt producer used in water treatment.

No surprises - Kemira report 33% decline in net profit for the third quarter 2008.

The 3Q08 financial results reported by Kemira were as predicted with no real surprises.  Pre-tax profits fell to EUR 48.8 mio from EUR 68.3 mio in the same period last year (net profit declined 33% to EUR 35.4 from Eur 52.9 mio last year).  High raw material and energy costs were blamed.  July to September net sales rose 7% to EUR 780 mio from about EUR 730 mio a year ago.

For the pulp and paper chemical activities, Kemira reported a rise in revenue from July to September of 9% (EUR 259.7 mio) with an organic growth in local currencies of 13%.  Operating profit, excluding non-recurring items, declined to EUR 15.3 mio (-32%).  The reasons for the decline were given as:

• Currency exchange (-EUR 8 mio)
• Competitive environment - by this they probably mean that producers in the USA, China and India had an advantage, especially in the growth markets.  This has made it difficult for Kemira to offset their increasing costs by raising prices.
• Closure of paper mills - pulp and paper production has increased over the same period and as Kemira point out, the market has declined in Europe and North America and increased in the growing markets (especially China) where Kemira has not been as competitive against strong local companies.
• High raw material, freight and energy costs - there was some gain in raising prices (EUR 9 mio) and an increased volume (EUR 7 mio) but European paper chemical producers continue to find it hard to compete.  

From January to December, 2008, Kemira's pulp and paper chemical business has seen a moderate revenue growth to EUR 799.4 mio (+ 1%) and a decline in operating profit to EUR 41.0 mio (-39%).

The one significant non-recurring item was the EUR 10.15 mio fine imposed by the European Commission on Finnish Chemicals (acquired by Kemira) for their part in the sodium chlorate cartel.

It will now be interesting to see how once largest pulp and paper chemical producer manages the threat from the now larger combination of BASF and Ciba speciality chemicals.  Kemira will remain big in pulping chemicals but are now dwarfed by the new BASF when it comes to speciality chemicals used in papermaking.  The biggest threat to these larger European chemical companies will continue to come from the smaller, lower-cost, flexible companies emerging in the growth markets.

Chelating agents - Biodegradable alternatives to EDTA and DTPA

EDTA and DTPA are widely used in the pulp and paper industry for chelating metal ions, especially in the bleaching of chemical or recycled fibres with peroxide where many metal ions increase the decomposition of peroxide.

Initially in Germany and later in a number of other countries, the poor biodegradability (persistence) of EDTA and DTPA in the environment raised questions about the efficacy of using these chemicals.  Not surprisingly, there has been considerable research into finding alternatives, especially by the peroxide producers and suppliers.

Recently Kemira R&D has developed some alternative chemistries which are starting to show promise.  As is often the case with greener alternatives, there is a price to pay as the cost/perfomance of the new products is inferior.  Nevertheless, there is now a good environmentally-friendly option.  The products marketed by Kemira under the Fennobio trademark are based on aspartic acid diethoxysuccinate (AES).

There is a more detailed article by Kemira on this topic.

Kemira announce R&D investment in Brazil

In building on the plans reported in a recent blog, Kemira has announced that it will open a technological centre in Sao Paulo, Brazil. The new R&D centre is expected to start up in 2009. 

Kemira reported a turnover of EUR 100 mio in the region in 2007 - a 67% increase on the previous year - so the region is important for their business and justifies having one of the 5 strategically-placed technical centres.  As part of the justification for the location, Kemira stated that it expects the chemicals for pulp bleaching in Latin America to increase by 5.7% per annum from a USD 275 mio in 2007 to USD 385 mio in 2012 m - this of course depends on whose market data you use and when it was compiled.  Pulp is not the only growth area as South America also realises the potential in moving up the value chain and producing more paper and board.

This announcement is part of Kemira's plan to establish 5 significant global technical centres and consolidate its activities in the key regions, rather than have the 17 dispersed R&D sites they have today.

Kemira move forward with plans to cut personnel

Kemiar announced that it has concluded its, 'co-determination negotiations', with staff at Oulu, Espoo, Vaasa, Helsinki and Äetsä.

In other words, and to be specific, 298 people will loose their jobs in Finland - 191 will go and another 107 will be retired early or layed off as they are temporary staff.

The full announcement can be read on the Kemira web site.

Kemira consolidate R&D - invest in Technology Enterprise Park at Georgia Tech

Kemira announced that it has signed a lease on a new R&D centre located at Technology Enterprise Park (TEP) in association with the Georgia Institute of Technology in Atlanta, Georgia, USA.  The new centre will open in summer 2009 and employ 85 R&D professionals.

This move is part of Kemira's plan to consolidate 17 existing R&D sites into 5 global facilities.  The sites will be at TEP, Gerogia; Northern Europe; Continental Europe; Asia; and later one in Latin America.

The five centres will be strategically focused on Kemira's customers locally and globally, meeting the needs of the pulp and paper, water treatment, oil and mining industries.

Kemira go on cost-cutting rampage after disappointing 2nd quarter results

After the recent disappointing financial results, Kemira, the leading supplier of paper chemicals, has launched a global savings program to improve its profitability (see press release).

Kemira plans to save more than EUR 50 million per annum, of which more than EUR 20 million is planned to come from Kemira's Finnish operations. It will start 'co-determination negotiations' at 5 of the group's Finnish sites - Oulu, Vaasa, Äetsä, Espoo and Helsinki. The restructuring and savings program may involve a net reduction of up to 300 jobs in Finland but none of the Finnish sites will be closed.

Kemira has approximately 10,700 employees worldwide, almost 3,000 of whom are based in 13 sites in Finland. The company has spent its way to being the largest supplier of paper chemicals by making a series of small to medium-sized acquisitions which have proven difficult to integrate. As it becomes clear where the cost-savings will impact on Kemira's paper chemicals operations, the information will be published on this weblog.

The reaction to the announcement has been:

• An employee walkout at the Vaasa facility (see press article)
• ........ other details will be added as they arise
  

Kemira first-half results - tough times for pulp and paper chemicals

Kemira announced their first-half, 2008 results today - these are clearly troubled times for the paper chemicals giant, but they are not alone. Highlights for the Pulp and Paper business are (1H08):

• First-half sales of EUR 517.5 mio (down from 529.7 mio in 2007) - Kemira point to mill closures in Europe and North America for loss of sales with some effect of unfavourable currency exchange rates
  
• Operating profit 5% of sales (down from 8.7% in 2007) - Unable to increase sales prices sufficiently and compensate for the cost hikes - especially higher oil and energy-related costs
• There was an impact on cash-flow from the EU fine for operating a chlorate cartel (see earlier blog)
  

Kemira has made a commitment to paper chemicals and will no doubt be able to survive the current market climate. It is doubtful that they will, in the short term, participate in the future market consolidation as they are yet to effectively integrate their recent acquisitions.

Change of management at Kemira

Kemira has announced changes to its management as follows:

Jyrki Mäki-Kala has been appointed Chief Financial Officer of Kemira from 1st of October 2008. Mäki-Kala is currently working as President of Kemira Pulp&Paper. Kemira's current CFO Esa Tirkkonen will continue his work as Deputy CEO of Kemira Oyj until his retirement in 2009. Tirkkonen will continue his responsibilities in Mergers&Acquistions area including steering and managing Tikkurila's spin off - process.

Petri Helsky has been appointed President of The Paper segment. Helsky is currently working as Vice President responsible for the ChemSolutions business unit.

Pekka Ojanpää has been appointed President of the Water segment. Ojanpää is currently responsible for the business area Kemira Water. Randy Owens has been appointed President of the Oil and Mining segment. He is currently working as Vice President responsible for the Additives business unit.

Håkan Kylander has been appointed Region Head of Kemira Europe. He is currently working as Vice President, Human Resources in Kemira Pulp&Paper. All of these appointments will take effect on 1st of October 2008.

Kemira 'enforce' global price increases for pulp and paper chemicals

Not to be outdone, Kemira Pulp&Paper announced that they too will 'enforce' global price increases, effective June 16th, 2008.

The Kemira Group will raise prices across its entire product portfolio and in some cases increases will exceed 25%. The increases reflect the increasing costs for raw materials, energy and transportation. No relief is expected in the near future, states Kemira´s President and CEO Harri Kerminen. "Under these conditions our only choice is to implement product price increases, while we will continue to take all measures to keep costs under control to minimize the impact on our customers."

We will attempt to try to track how effectively these announcements by the major paper chemical suppliers are implemented in the face of competition from the emerging companies in India and China. Watch this blog for updates.

Canda International

Antitrust - EU Imposes Heavy Fines on Chlorate Cartel

The European Commission announced that it has imposed fines totalling over EUR 79 mio on four groups of companies for operating a cartel - fixing prices and allocating sales volumes of sodium chlorate. This chemical is mainly used in chemical pulp production where is used to produce the bleaching chemical, chlorine dioxide.

Some of the highlights are:

• The companies involved: EKA Chemicals, Akzo Nobel, Finnish Chemicals (now Kemira), Erikem Luxembourg, Arkema France, Elf Aquitaine, Aragonesas Industrias y Energia and Utralia.
• Period the cartel operated: 1994 - 2000
• Akzo Nobel and EKA Chemicals (subsidiary of Akzo Nobel) received full immunity from the fines as they were first to provide information about the cartel
• Finnish Chemicals (now Kemira) had its fine reduced by 50% for co-operating with the investigation
• The fine imposed on Arkema France was increased by 90% as it was a repeat offender - participated in 'three cartels before this one'

Full details of the fines and the rulings are available from the European Commission web site.

Keywords: Paper Chemicals, bleaching, chlorine dioxide, sodium chlorate, Canda International

R&D: Kemira sign EUR 100 mio deal with European Investment Bank

Kemira announced it has reached agreement with the European Investment Bank (EIB) on a 12-year loan to fund, 'near-term', innovation and R&D. This includes the co-operation with universities, institutes of technology and research institutes combined with the activities at the Kemira Group's own research centers. Topics mentioned are customer solutions for the forest industry, formulation science, water treatment and nanotechnology.

This is good news for the paper industry and gives a clear commitment from Kemira to their future in paper chemical innovation. When most paper chemicals companies are cutting back on R&D, Kemira has found an innovative way to fund their activities and to support the work in universities and research institutes.