Earnings call transcript: Kemira Q2 2025 highlights revenue decline and strategic initiatives

Kemira’s Q2 2025 earnings call revealed a mixed financial performance, with a notable revenue decline but stable EBITDA margins. The company’s revenue fell to €693 million, a 3% organic decline, primarily due to challenges in the Packaging and Hygiene Solutions segment. Despite the decline, Kemira maintained an EBITDA margin of 19%, within its guided range. According to InvestingPro data, the company trades at an attractive P/E ratio of 13x and appears undervalued based on Fair Value analysis. The stock price saw a slight decrease of 1% following the announcement, though historical data shows relatively low price volatility.

Key Takeaways

• Kemira’s Q2 revenue dropped by 3% organically, impacted by the Packaging and Hygiene Solutions segment.
• EBITDA margin remained stable at 19%, aligning with the company’s guidance.
• The company initiated a €100 million share buyback program to bolster shareholder value.
• Strategic partnerships and innovations are underway, including collaborations in bio-based packaging and textile fiber solutions.

Company Performance

Kemira faced headwinds in Q2 2025, with a 3% organic revenue decline attributed to the Packaging and Hygiene Solutions segment. Currency exchange rates also negatively impacted financial results. Despite these challenges, the company maintained a strong EBITDA margin of 19%, demonstrating resilience in its core operations. The Water Solutions and Fiber Essentials segments provided stability amidst market uncertainties.

Financial Highlights

• Revenue: €693 million, a 3% organic decline
• EBITDA Margin: 19%, within the guided 18-21% range
• Earnings Per Share: €0.35
• Share Buyback Program: €100 million initiated

Outlook & Guidance

Kemira updated its 2025 revenue outlook to a range of €2.7 to €2.95 billion, with operative EBITDA guidance between €510 and €580 million. The company anticipates gradual improvement in the profitability of its Packaging and Hygiene Solutions segment. InvestingPro analysis reveals multiple positive indicators, including strong financial health metrics and analyst consensus recommendations. Get access to 8 additional ProTips and comprehensive valuation metrics with an InvestingPro subscription.

Executive Commentary

CEO Antti Salminen emphasized the company’s ability to perform within its profitability range, stating, "We can perform good times, bad times in the guided 18% to 21% profitability range." CFO Petri Castrén highlighted the company’s strategic balance between cost management and investment, saying, "We are managing the business within those guardrails and still being able to invest."

Risks and Challenges

• Economic uncertainty continues to impact the packaging and industrial markets.
• Currency exchange rates pose ongoing challenges to financial performance.
• The Packaging and Hygiene Solutions segment faces significant market pressures.
• Regulatory changes, such as PFAS regulations, could affect operational dynamics.

Q&A

During the Q&A session, analysts inquired about Kemira’s M&A strategy, to which executives confirmed a strong appetite for acquisitions. Questions also focused on the impact of currency exchange rates and potential for further cost optimization. The company’s response indicated a proactive approach to navigating these challenges while maintaining strategic growth initiatives.

Full transcript - Kemira Oyj (KEMIRA) Q2 2025:

Kiira Fröberg, Head of Investor Relations, Kemira: Good morning everyone and welcome to Kemira’s Q2 result webcast. My name is Kiira Fröberg and I’m the new Head of Investor Relations at Kemira. We issued our half year financial report today and maintained a solid profitability in a challenging market environment. We have made some changes to our presentation content and flow. Next, our President and CEO Antti Salminen will present you the group figures and we’ll also discuss our strategic developments and the outlook. After that, our CFO Petri Castrén will continue with business unit performance and will also discuss the financials in a bit more detail. We also today announced that we will start share buybacks. Petri will cover the share buyback program in his presentation. Now Antti, the stage is yours.

Antti Salminen, President and CEO, Kemira: Thank you, Kiira, and warm welcome to Kemira. It’s really good to have you with us. Yes, it’s my great pleasure to present Kemira’s quarter two results in 2025. Really solid 19% profitability amongst challenging market conditions, which I think demonstrates the resilience of our business model and the changes that we have made structurally to the company. As I’ve been talking about previously, we can perform good times, bad times in the guided 18% to 21% profitability range, which this quarter two is a really good demonstration of. As mentioned, the market environment was challenging.

Real headwinds, especially in the Packaging and Hygiene Solutions market, which gets the most impact from the overall global economic weakness, which resulted in a disappointing negative organic growth of 3% for the quarter, which is really, and I will talk more about it later, but which is really coming mostly from the Packaging and Hygiene Solutions part of the business, but also impacted by the exchange rates, especially the U.S. dollar. On July 10th, we updated our outlook. I will talk more about it later. As mentioned, I think the highlight of the quarter was the strong profitability overall and especially in the Water Solutions and Fiber Essentials business, which actually increased their profitability in quarter two.

As a result, of course, the balance sheet continues to be strong, which enables us to continue executing on our growth strategy, of which I will talk a little bit more later as well on the execution of the growth strategy. As we have been several times explaining, it is both organic and inorganic growth. Some examples of that now in the quarter two are the capacity expansion here in Finland at our Aga site for the sodium borohydrate powder technology. This continues kind of a track record of small capacity expansions that we’ve announced in quarter one for the Water Solutions business. Now this is mostly serving the Fiber Essentials business, but also the powder capacity is helping us to support the growing pharma industry.

As Kiira mentioned in the beginning, the Board of Directors decided yesterday to launch a share buyback program to optimize our capital structure and serve the interest of our diverse investor base and shareholders. Petri, as mentioned, will talk more about the details of the buyback program. I will now next turn into some of the leading indicators that give me the confidence to say that the performance will be solid in the future as well. We measured, as we constantly do, the engagement of our customers, customer satisfaction measured by the net promoter score, which was actually all-time high. Our customers in the reports keep telling that the strongholds of Kemira are the reliability of delivery, good quality of the products, and the professionalism of our service people and salesforce. These are really good baselines to build the future on.

Similarly, we of course constantly follow our employee satisfaction, employee engagement, and it remained on a high 80-point level despite the fact that we went through a major reorganization last year, which always causes some stress in the organization. Despite that, we remain on a good solid high level, which is actually well above the industry norm in this case. These are kind of leading indicators that give me the confidence that yes, we are in a good position to invest for the growth strategy execution. If we look at a bit the group level finances for the quarter, as mentioned, revenue declined, being €693 million for the quarter.

This really came mostly from the Packaging and Hygiene Solutions side. There was some decline in the Water Solutions as well, but mostly coming from one single tolling customer that we have there, which impacted that, which had a major impact there. As mentioned, also the exchange rates play a big role here, so a major impact on the decline from there as well. Year on year, both the volumes and the prices declined, but sequentially quarter on quarter we saw some increase already in the sales volumes, which I think is a positive sign. As a result of the weak top line, that basically puts pressure on the profitability performance as well, as the fixed costs are not scaling down with the same speed as the revenues in this kind of situation.

We managed to manage the cost base in such a manner that basically the EBITDA performance was steady. If you look at the previous quarters, we are steadily performing roughly on this 19% level now in this weak market conditions. I just have to express a big thank you for everybody at Kemira because the whole organization has taken this challenge really seriously, that as the markets are weak we need to do even more in order to manage the profitability of the business, which this exemplifies. As mentioned, the main driver for the bit, a small decline in the profitability is the low top line, but also the currency exchange rates impact here, and as I mentioned already in the beginning, actually the profitability of the Water Solutions business and Fiber Essentials business both increased.

We really have the profitability challenge in the Fiber Essentials business, sorry, in the Packaging and Hygiene Solutions business, as the packaging chemistry is the one that gets the most direct impact from the weak global economy. As we as consumers don’t buy stuff, as companies don’t invest, packaging material is not consumed, and as a consequence our chemistry that goes into packaging companies is not consumed. That hit we get very directly, and we see the weakness there in the profitability. Petra will talk more about the profitability, which was really unsatisfactory in the Packaging and Hygiene Solutions. As a consequence, we have launched a self-help program, a profitability improvement program specifically for the Packaging and Hygiene Solutions, which we expect to yield results in roughly about a year’s time and improve significantly the profitability of that business. The earnings per share for the quarter were €0.35.

Now, about the growth strategy. Yes, the markets are not supporting, but we continue to perform and execute on our growth strategy and growth programs. Organic expansions to support the growth in especially water business, inorganic expansions. We have a strong pipeline which we are working on. Example of that is the Thatcher Group’s iron sulphate business in the U.S. East Coast, the acquisition of which we completed in the beginning of the quarter. As mentioned already, capacity expansions, the A expansion here in Finland. We also continue to execute on the longer-term growth, the innovation, invest more into innovation to fuel the longer-term growth of the company. There, of course, it is internal innovation investments, but also a lot of external partnership type of work that we do to expand our capability technology-wise, geographically.

Examples of that now in quarter two were the already mentioned Blufa partnership in China to commercialize fully bio-based materials for the packaging industry for barrier coatings there, but also customer collaboration. We announced the collaboration program with one of our most important biggest customers, Mezzä Group, to help them develop together with them their CURA textile fiber solutions. Then again, and this is one that I’m really excited about, partnership program with the Cambridge, UK-based CASP AI company to work on artificial intelligence-based innovation programs to develop new-to-the-world type of materials, especially to the growing needs of the water business. This is something which I think can revolutionize the old-fashioned R&D work in the chemical industry and really exciting work. Early days, just starting, but I think really important for our longer-term growth strategy. Strong balance sheet, steady profitability.

We continue to execute on our growth plans exactly as we have talked about previously. Finally, as mentioned, on July 10th we updated our outlook for the year, the new one being €2.7 to €2.95 billion of revenue and operative EBITDA between €510 and €580 million. The assumptions behind the outlook are pretty much stable and as they have been, we really don’t see this year any further support coming from the market. As we all see and read from the news, the global economy is in a very uncertain state and that is the kind of a major kind of underlying factor for the situation. The company is healthy, performing well, steady profitability in quarter two, and Petri will continue and talk more about the business unit specific results as well as about the share buyback program. Thank you.

Petri Castrén, CFO, Kemira: Very good. Thanks Antti. As Kiira already introduced, we have changed the presentation flow. I’ll cover the core finance slides, but I’ll also offer some of the directional comments on the business units. I’ll also give some examples of the resilience that Antti was talking about, how this resilience is actually demonstrated by the continued solid profitability, one can say even good profitability considering the market conditions. I’ll also address some of the reasons for the PHS weakness and finally cover the buyback program. I think those are the key points of today’s report looking at the revenue and profitability bridges. Of course, the revenue declined $40 million a year, which is a big number, but half of it was currency. The U.S. dollar weakness has an impact and obviously was one of the key drivers behind our decision to change the outlook for the year.

Organic growth was a negative 3%, so there was a small volume decline and there was also small negative pricing impact. However, when we get to the BU slides, I’ll give directional comments and this was not uniform. Antti was already talking about the resilience of our Water Solutions business, particularly the core water business, excluding the tolling revenue, and then the resilience and the good performance of our Fiber Essentials business. These same drivers, price, volume, and currency, were the drivers that were impacting and were the key drivers behind the $9 million profit decline in the EBITDA line. We were able to get small positive on the variable cost benefit. As Antti said, fixed costs were below last year’s rate. That helped the Q2 outcome, net impact about $6 million in the year-on-year comparison between the change of selling prices and the variable costs.

We are getting to a stage where this curve is flattening and indicating that we are in a very, very stable or quite stable pricing environment. Overall, through the raw material basket, we don’t see much volatility. There are some individual items that impact, we have some product lines, but through the basket we are seeing relatively stable or have seen relatively stable in the last couple of quarters. It actually looks that way in the foreseeable future, which in the raw material environment is not hugely long. The directional comments on the business units, and I’ll start with Water Solutions. Antti was already talking about that the decline in Water Solutions was really the lower tolling revenue, tolling activity that we have with one of our tolling customers. We don’t have many, but this is the biggest tolling customer that we have.

There were also some weakness in the industrial demand. However, if we look at the really core water treatment, the urban, the municipal water treatment business, very steady and the growth was essentially flat with a small growth in EMEA offset by a small decline in Americas. Again, this core part of our water business is very resilient and also quite predictable, which helps sequentially from Q1 to Q2. Revenues and volumes increased. This is perhaps a seasonal pattern, which I think I was sort of alluding to already in Q1 report. Profitability at a very good level, margin also somewhat positively impacted by the product mix, meaning again less tolling revenue. I would call that a sort of lower quality revenue, the tolling revenue. Therefore, the mix was favorable from the margin point of view. Packaging and Hygiene Solutions.

Of course, this business unit was clearly impacted by the challenging market conditions. We’ve already seen and heard some comments from customers about the continued soft environment in EMEA. On the other hand, there are some early signs that the market may be picking up in America, particularly North America. However, the weak spot for us, particularly in this quarter, was APAC. This quarter was perhaps the first financial outcome was even more impacted because we did have some maintenance breaks in two of our key sites in China in APAC. Of course, when we had longer maintenance breaks in those sites, we don’t get the associated production. We get so-called fixed variances, and they were impacting the result quite negatively. We also had one good-sized customer cease operations, and we have not been able to yet replace that lost revenue.

There is a little bit of that situation as well. The biggest profitability challenge therefore is in APAC. In fact, if you exclude APAC and look at the rest of the world, meaning EMEA and Americas, we are already operating at even in this quarter in mid-teens EBITDA profitability, which again shows that even in this difficult time this business is quite resilient. It’s just that the APAC business is not able to scale down costs with the decline in market as quickly as it should, and this is of course something that needs to be addressed. The business unit profit improvement that Antti was also talking about is a broad program. It addresses our fixed cost base. It also addresses some of the variable costs that we do, but it also has to address some of the top line.

With this program we are also looking how to get some additional volume to the system, and like Antti said, we clearly expect significant improvement on that by next year. Then fiber, fiber market, it was stable during the quarter. In fact, we had 3% organic growth for the quarter. When we addressed the market conditions and market gave the assumptions for the rest of the year last week, we noted that along with the weak packaging market, we are seeing some signs of weakness in the pulp market. This was of course referring to some of the customer announcements of market-related downtime. However, this business is quite resilient and I’m not hugely worried about it, but of course the potential reduction in top line impacts profitability. Very good.

We did see some formula-related price increases, particularly in North America, as the electricity cost in Q1 was quite high in North America. Reminder, there’s a pass-through mechanism or formula mechanism in our caustic prices in North America, but it lags a little bit, it lags about a quarter of the cost. The previous quarter’s cost base impacts the next quarter’s revenue, so we did get some benefit of that. Now on the balance sheet, really no change. We continue to have very strong balance sheet. Arguably suboptimal amount of leverage as we are now starting to address with the buyback program that was announced. Particularly if we consider the overall capital structure and the cost of capital, operative ROCE now below 20%. Clearly because of the operating profit EBIT has reduced trailing 12 months. There’s really no change in the capital base.

Cash flow from operation $64 million during the quarter. Not quite at the level that we have seen it in the last few years. We have had some net working capital build up. We haven’t been quite able to scale down the level of inventory or one could say inventory effectiveness with declining revenues. This is obviously something that will need to be addressed during the second half of the year. There is a seasonal pattern in our cash flow generation as those who have followed us longer time have noticed. We have clearly over 50% of the cash flow is generated on the second half of the year in a typical year, and oftentimes concentration under Q4.

Some of the seasonal patterns that drive this are that we tend to have a higher share of capital expenditures that get final acceptances that trigger payments in the fourth quarter, and then actually those payments are then made in Q1, but those payables are created in Q4 also. The incentive cycle is such that you accrue payments and then you pay annual incentives in the beginning of the year. About the CapEx, no change in our forecast. We expect that CapEx will be slightly higher this year or somewhat higher than last year. That’s there then. About buyback. Our board has discussed the merits of share buyback program in many of its meetings in the recent past as the company’s balance sheet has increased and the question has become more relevant.

We recognize that the capital structure is not the most optimal now and that we actually could benefit of some additional leverage from the current half turn of leverage that we have. During these considerations and discussion, it has been always very important to stress that any buyback program will not impact our dividend policy. Also, that it cannot impact our ability to execute our growth strategy, whether it’s organic investments or whether it’s inorganic program and opportunities that we want to take advantage of. I think we can safely and very comfortably conclude that this program, which has now been announced with the maximum amount of €100 million, will not impede with either one of these objectives. This will not impact dividend policy. This will not prevent us from executing any of the M&A opportunities that we see otherwise fit.

Therefore, of course, this buyback program is also a recognition that we have different shareholders and different interest between different shareholders, particularly regarding the taxation of the dividends. Many of our foreign shareholders get much more heavily taxed for dividends, and this sort of addresses their needs as well. The program can earliest begin next Tuesday, will likely take some time to execute. Based on the recent trading volume, it will be 9 to 12 months or something in that range. This will be a lengthy execution that we will be executing. As Antti already covered the outlook, we are now ready to move to the Q and A session. Operator, please, if you wish to ask the question, please dial on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial 6 on your telephone keypad.

The next question comes from Anssi Rousu from SEB. Please go ahead.

Yes, hi, Ol, and thank you for the presentation. I have a few questions that I.

Antti Salminen, President and CEO, Kemira: Go one by one.

First, one clarifying question regarding the Water Solutions business. I think the revenue decreased by 4%, but did you mention the volume impact year over year?

Petri Castrén, CFO, Kemira: I did not mention the volume impact, and I was talking about the organic growth, which I believe was 3%, but I stand to be corrected if you. I don’t have the notes in front of me right now, but I was directionally commenting that the volume decline was really from the industrial, and it was the tolling revenue within that. If you combine the urban EMEA and the urban Americas, those were essentially flat, with EMEA small growth offsetting the small decline in Americas.

Okay, and then maybe about this weakness in the Packaging and Hygiene Solutions segment. You mentioned that the weakness is clear, especially in APAC. Do you think that this is actually just some temporary weakness or maybe something more structural? You also mentioned some early positive signs in the U.S. What kind of signs are you seeing there?

Antti Salminen, President and CEO, Kemira: Good question. As I tried to explain when I talked generally about the markets, it’s a good question what is temporary. We all see how turbulent the market’s overall economy in the world currently is. The packaging market is one that actually tracks very closely the overall economy. Everything that consumes packaging board is everything that is packed somehow, either consumer products or investment goods or whatever, basically or construction industry. As long as the economy is weak and uncertain as we see today, I think this same uncertainty will continue on our Packaging and Hygiene Solutions market. As Petri mentioned, kind of some positive signs. We’ve seen some kind of from the packaging market in America, some weak positive signs. Too early to draw final conclusions, but it seems that the bottom has been reached and there might be some light in the end of the tunnel.

Okay, thanks. Finally, about the Fiber Essentials segment, you mentioned that there was maybe some signs of increasing softness in the pulp industry. Was this something which got worse towards the end of the quarter, or how should we think about the starting point heading into Q3?

I mean, as Petri Castrén mentioned, you just need to look at our key customers and their announcements. That’s what you can read. I mean, some of them have announced market-related downtime, and that downtime will have an impact on us.

Yeah, I understand. Thank you.

Kiira Fröberg, Head of Investor Relations, Kemira: Thank you. Now we can take the next question from the line, please.

Petri Castrén, CFO, Kemira: The next question comes from Martin Roediger from Kepler Cheuvreux. Please go ahead.

Thank you. Just a follow-up question or a few questions from my side. First, a follow-up question on Packaging and Hygiene Solutions as well as on Fiber Essentials. Is there any, let’s say, important item regarding the momentum within the second quarter and also your order book in July, which, let’s say, gives you the confidence that, for example, in Packaging and Hygiene Solutions it is just a temporary item or in the fiber business that there is some softness ahead? Any, let’s say, color on the volume momentum during the quarter and also your order book, which gives some additional color? Secondly, on the share buyback program, you mentioned that it will not affect dividend and will not affect your strategic target for internal and external growth.

When I look at the relatively soft cash flow in the first half, is there, let’s say, a reason to believe that at least in the short term your appetite for acquisitions is somewhat reduced? Thirdly, you were already quite successful in your reduction of fixed costs. Where do you stand in these cost savings activities? What is still to come in the second half? Do you have additional ammunition to implement additional cost savings going forward? These are my three questions.

Kiira Fröberg, Head of Investor Relations, Kemira: We will try to remember all of the questions, but please, Martin, you can then comment if they are not addressed.

Antti Salminen, President and CEO, Kemira: I’ll take the first and then pass on to Petri to comment on the share buyback program and the fixed cost savings programs. The first question about our order book and development within the quarter. Please remember we don’t comment within the quarter developments. We only comment on a quarter as a whole. We don’t really release order book numbers as well. In our case we just comment about the revenues and profits. This is a question that I’m not in a position to really answer. Petri, the share buyback program.

Petri Castrén, CFO, Kemira: Yeah, so relatively soft cash flow, like I indicated, it actually mostly is from the net working capital devoted. First of all, we have no net working capital problem. Receivables turn really well. We don’t have bad credits or anything like that. Inventory slow moving and goods really relatively small. This net working capital can actually change from quarter to quarter quite dramatically. I’m not hugely worried about that. I know that we can improve the cash generation from the net working capital in the second half of the year.

Secondly, we’ve always said that this capital structure of half or now we’re perhaps more openly admitting that this half a turn of leverage is not an optimal capital structure and we could take over $1 billion of debt and we still maintain an investment grade credit profile, which has been sort of a saying that how we are, how we want to manage that. Even when we are seeing opportunities to invest organically or inorganically, and of course it would be mostly the M&A activity that would potentially increase the debt in a more dramatic fashion or more faster pace. It’s the overall capacity to take on debt that is delimiting. It’s not the quarterly. We don’t buy companies based from a quarterly cash flow.

In that sense, that is also the way of how I would address the last question, is that does this impact the desire to do M&A?

No.

We see our business very resilient and our continued cash flow generation capability as unchanged. That’s why we are comfortably starting this type of a buyback program and still maintaining the ability to execute the two other strategic priorities or two other capital allocation priorities, meaning dividend policy and ability to invest enough on organic and inorganic activities.

Thank you. The question about the cost savings.

When we started the cost saving program, I announced that. I forget exactly when it was, maybe a quarter ago or so. Of course, fixed costs by nature are not immediately to come. Most of the activity will probably be visible in the second quarter, I’m sorry, second half of the year and perhaps even accelerating towards it. When you are really looking at fixed cost improvements, those are not. We’re not laying off people. At this time, we have done no layoffs of people because of that. This is more structural improvements. I would also say that at 19% profitability, which is even in this market condition, is quite okay within the guidance range, and when we induce the EBITDA range, we call them guardrails. Within these guardrails, we are investing into growth.

Now you’re sort of seeing the guardrails in operation, that we are managing the business within those guardrails and still being able to invest into this, even in some of those longer term investments like the CASP AI, which is clearly investment into something that will not bear results in the next couple of years. In that sense, I’ll stop my answer there because I forgot the question.

Kiira Fröberg, Head of Investor Relations, Kemira: Was that all, Martin?

Thank you, thank you, thank you very much.

Thank you. Let’s now take the next question, please.

Petri Castrén, CFO, Kemira: The next question comes from Joni Sandval from Nordea. Please go ahead.

Yeah, thanks. It’s Joni from Nordea. Thanks for the presentation. Maybe still a small clarification on the outlook comments. As you mentioned, you are expecting some softness in the pulp market. Is there geographical differences? I mean, is this mainly driven now by the Nordics?

Antti Salminen, President and CEO, Kemira: If I comment the overall markets, of course the examples that you see from the customers, we have heard some of the kind of big Nordic customers now. If you look at the overall market development, the main pulp markets in Latin America are still performing very strong. These new assets that many companies and customers have there are performing well. We have of course seen it in the APAC market where we are not that big in the Fiber Essentials business. As the whole pulp and paper industry in APAC has been soft, that’s visible there. Overall, I mean this is the. It’s a global market, really, the pulp market. If it’s soft somewhere, typically it’s soft elsewhere as well. Latin America seems to be still holding very strong.

Petri Castrén, CFO, Kemira: Latin America has clearly the lowest cost base, so they can operate through almost any cycle at full speed. Of course, it’s the higher cost players that will need to do. Therefore, structurally we’ve seen that actually North American pulp producers generally are the ones who are being impacted most by the weakness.

Yeah, that’s clear. Maybe then a quick question on this Water Solutions tolling customer. I understand that it’s low profitable or lower profitability on this, but I think you were speaking in Q1 or expecting in Q1 that this would fade out in Q2. Should we expect now these revenues to come back in H2?

Antti Salminen, President and CEO, Kemira: Not commenting to the future here, but yes. I mean we commented in Q1 that we were having a significant hole in the revenue base in Q1. Now we still had some of that, but some of those revenues came back in Q2. That is happening, and you see it in the numbers as well.

Okay, thanks. Then a couple of questions left on the Packaging and Hygiene Solutions and the profit improvement self-help measures that you are taking. Should we expect this should be mainly visible in 2026, and should we expect then Packaging and Hygiene Solutions to reach these mid-teens margins after that?

Petri Castrén, CFO, Kemira: We have said that we are looking for significant improvement for the segment by next year. I made a comment that the EMEA and Americas already in these very difficult market conditions, without the benefit of any of these improvement actions, is already within mid teens range combined. Yes, I think this will be gradual. There are some actions that will be quicker to show results. I did mention that APAC was particularly hit, and with the maintenance shutdowns that we had impacting two of our sites, particularly those maintenance breaks are more painful when you have low revenue. That’s when you have more difficulties covering the fixed cost when you don’t create any revenue, and therefore we don’t see that happening in particular in APAC for the rest of the year.

You’ll see, probably, we should expect some gradual improvement in the profitability of PHS through towards the end, towards next year.

Okay, thanks. Lastly, maybe FX impact on EBITDA appears to be, at least to me, somewhat higher than earlier anticipating. Assume the current rates, we still expect similar kind of negative impacts now in H2.

If you look at the dollar rate because dollar was sort of a trump trade, the dollar was very strong, close to parity towards Q4 last year. This is now coming off memory. Of course, from the currency point of view, we’ll have a tough comparison. Even if that rate and the current dollar rate, yes, the comparison will be quite challenging, particularly in Q4. Yes, it is expected to continue, and I gave a rough estimate that each €0.01 in the exchange rate between euro and the U.S. dollar is between €1 million to €2 million of EBITDA as a group, as really as a sort of a rough guidance. Of course, it depends a little bit on the mix, et cetera, so don’t take that literally, but it gives you an indication of the currency sensitivity.

Kiira Fröberg, Head of Investor Relations, Kemira: Our outlook for the year assumes that the end of Q2 exchange rate level.

Continue. Yeah, exactly. Thank you. That’s all from me, thank you.

Next question please.

Petri Castrén, CFO, Kemira: The next question comes from Henri Partkinen from OP Financial Group. Please go ahead. Henri Partkinen, OP Financial Group. Your line is now unmuted. Please go ahead.

Kiira Fröberg, Head of Investor Relations, Kemira: We can’t hear you, Henry, unfortunately. Let’s take the next question from the line, please.

Petri Castrén, CFO, Kemira: The next question comes from Andrew Nowell from Chemical ESG. Please go ahead.

Hi, good morning. Thanks for taking my questions. I’ve got two please. I wanted to ask what do you see as the main hindrances to doing M&A, if I may make an observation. You know where I’m sat. It feels like another week goes by when there’s not some sort of water deal goes by and a lot of it is around, you know, a lot of these by acquiring companies are PE owned. Yeah, I just wanted to sort of get a feel for, you know, is it a quality issue, would you say, or valuation gap? That’s the first question. The second one is with the U.S. there’s a sort of seemingly a shift on PFAS protections, cutting limits, maybe the sort of pressure to eliminate PFAS is sort of reducing.

I just wondered what’s your perspective on that and, you know, are you going to kind of throttle your endeavors in that area if the slowdown in PFAS elimination does sort of take hold. Thanks a lot.

Antti Salminen, President and CEO, Kemira: Thanks. I mean there’s no real hindrance from the execution of M&A. We are just very selective. We want to acquire businesses that build on our strategy and are kind of a good fit from financial, product, technology, and so perspective. We’re actively working on that and there’s no kind of practical hindrances for that. Work ongoing there. For the PFAS, I don’t really see that impact. If you look at it, there’s a bit of a delay in the U.S. scheme now, but actually still the U.S. regulation is going to be executed faster than the European, which is kind of maybe the first time in these environmental things that something happens quicker in the U.S. Even the kind of delayed scheme is faster than what the EU is currently planning with the transition times here.

In Europe, we have seen many times that many countries, especially the Nordic countries, have been implementing these environmental protection schemes faster than the EU regulation requires. We expect the same to happen with the PFAS. We’ve seen that in Sweden already and so forth. We’re very confident on this market developing and building up.

Okay, great. Thanks very much.

Kiira Fröberg, Head of Investor Relations, Kemira: Thank you. I think we still have one question from the line, please, or one caller. Please, let’s take the question.

Petri Castrén, CFO, Kemira: The next question comes from Mr. Tommy Reylo from DNB Carnegie. Please go ahead.

Hello, it’s Sami from BDNV Carnegie. Thanks for taking my question. Still coming back to the Packaging and Hygiene Solutions business margin, 9.9% in the business, much lower than from the first quarter. Is this the low do you think? Sorry if I missed this from the earlier commentary, but any numeric kind of cost savings on performance improvement ambitions you could comment on. If we think that you have been talking about margins getting closer to maybe 14%, 15%, you should be saving a couple of tens of millions of euros. I believe is this a fair assumption? Thank you.

We don’t give that type of guidance whether we have reached the bottom or what. We clearly said that by next year we expect significant improvement in the profitability. Your reading of it, I don’t want to literally comment on whether you’re actually exactly correct, but it’s directionally. It is directionally what we are expecting. Like I said, the profit improvement program addresses fixed costs. It addresses variable costs, but it has to address also volumes. When we are in a manufacturing business with a relatively high fixed cost burden, we need to get enough product to the machine. Otherwise, the scaling down of costs is very difficult.

I did mention, give you an offer that we did lose one significant customer or relatively sizable customer in the APAC region, not because we lost it to another competitor, but because the customer actually ceased operations and we have yet not been able to replace that volume. Of course, there are those sort of. One should not take that this only comes from cost items. No, we will not give any more measure on what we need to do externally.

Thank you very much. Maybe if I can throw in a second question, please. Again, apologies if you comment this, but regarding the share buyback program, positive news, I would say so well done. Is there a certain kind of level of details you can reveal that how is the program to be executed? Is there a certain time frame or range? How do you determine that? Okay, would you just launch it or.

Tommy, perhaps you missed some of it. I already mentioned that it can be released as early as next Tuesday, so July 22. I did mention that just because there are liquidity restrictions, it will take quite some time to execute this. The program authorization allows us to run this program until September 2026, meaning over a year. It will take between nine to twelve months or something like that to execute this without disturbing the market. Yes, we have given the execution of the program to a third party, so we will not make trading decisions. This is all detailed in the stock exchange release.

Excellent. Thank you very much.

Kiira Fröberg, Head of Investor Relations, Kemira: Thank you. I think those were all the questions from the line today. We also have a few questions in the webcast questionnaire function, so maybe we take them now. First, there is a question related to the Packaging and Hygiene Solutions profitability improvement initiative. Are the issues in China and the program that you have started linked together? Are these actions on costs and top line volume taken especially in the APAC region and China, or is this a more broad exercise?

Antti Salminen, President and CEO, Kemira: It is a more broad global exercise. Of course, the main focus will be in the APAC region where the profitability is the weakest. We expect kind of maturity of the actions to take place in the APAC region, but it is a global program.

Kiira Fröberg, Head of Investor Relations, Kemira: Yes. Another question on let’s say the optimal leverage level. I think that Petri Castrén addressed this one earlier, but can you give some comments on how you look at capital allocation? As you said, one could say your leverage is suboptimal, but still you are spending only €200 million on buybacks. Should we read this that your appetite for M&A is very high? Given the size of M&A you are looking for, tough to see any big changes in your leverage with current capital allocation plans. What is optimal leverage level? A follow up question. Can you remind me what is a small and what is a mid sized M&A in your commentary?

Antti Salminen, President and CEO, Kemira: If I start from some part of the lengthy question and let Petri continue then on more details. Yes, I mean we really have a high appetite for the acquisition. We have several times communicated that our growth strategy, especially in the water business, is partly relying on acquisitions, well-selected targeted acquisitions. Yes, at some occasion I’ve kind of given some guidance on the small and when I talk about small and medium sized acquisitions. In our business when I talk about small, you can use a kind of a proxy of say $10 million to $20 million EV and medium could be up to maybe $200 million. These are the kind of ranges of company values that we talk about when we talk about small and medium size. There were some additional details in the question.

Kiira Fröberg, Head of Investor Relations, Kemira: Yes, related to the optimal leverage level.

Petri Castrén, CFO, Kemira: That’s a really good question. Tough question. It’s a bit like a question on art. It depends on viewpoints. I think, you know, when you’re not there, it’s difficult to define and we haven’t even tried to define. I mentioned that we can borrow up to $1 billion and invest, maintain investment grade credit profile, which we have said that’s sort of, perhaps, the upper limit of that. It doesn’t mean that we want to get necessarily to two or two and a half times leverage. That’s where the upper limit is. The optimal is probably somewhere in between. I think there was also the question on the size of the buyback program. I think the liquidity restriction that I was alluding to in my previous answer, this will already take some time to execute.

Unless we did a sort of tender of shares and we don’t feel that that’s the right thing to do, really, we cannot actually execute on a whole lot more at this time.

Kiira Fröberg, Head of Investor Relations, Kemira: Thanks. One last one on the fixed cost reduction. Can the fixed cost reduction as outlined in the EBITDA Bridge and going forward be attributed to any specific function, process, or other cost item?

Petri Castrén, CFO, Kemira: I think I’ll take that. I think that’s a pretty specific question and I don’t think we have that level of specificity. I think we are addressing many topics within the company from general headcount and travel and consulting, spend and recruiting, etc. In some areas there may be more to do than in some others. I don’t think this is now the place to start speculating on those.

Kiira Fröberg, Head of Investor Relations, Kemira: Okay, I think it’s now time to conclude our webcast. Thank you for the active participation and also the questions. Just as a reminder, we will report our Q3 report on October 24th, so see you then at the latest. Of course, if there is any feedback, for example on the presentation format or so on, we always welcome the feedback, so please be in touch. With that, I would like to wish everyone a great summer. Thank you for today.

Petri Castrén, CFO, Kemira: Thank you. Well done. First one.

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