Here is a company report from Petri after the Q1 report.
Kemira’s Q1 result met our expectations but slightly missed consensus forecasts. In addition, the company revised down the underlying assumptions for its outlook, which we estimate acted as a driver for Friday’s share price decline (-9%). The downward revision of the market outlook was not a big surprise given the development of the operating environment, and we have not made significant forecast changes after the report. Kemira does not directly suffer from the surfaced tariff policy, but indirect effects are presumably visible through increased uncertainty in its demand. Assessing this is very challenging given the nature of the tariff policy, reflecting which we have raised our required rate of return and lowered our target price to EUR 20.5 (previously EUR 23.0). Reflecting the low valuation, we reiterate our ‘add’ recommendation for the stock.
Quoted from the report:
The balance sheet is strong, even though cash flow slowed down in Q1
Kemira generated business cash flow of only EUR 55 million in Q1, while organic investments amounted to EUR 35 million (incl. IFRS 16 payments). Against this background, free cash flow remained at only EUR 20 million (previous 12 months EUR 243 million), which reflects a significant working capital tie-up in Q1. However, this is typical seasonality, and we do not draw major conclusions from the cash flow development of a single quarter. Kemira’s net debt at the end of Q1’25 was EUR 216 million, corresponding to 0.4x the operational EBITDA of the previous 12 months. Thus, the company’s financial position is strong and enables even significant inorganic growth moves.
Here are Kaisa’s comments on this recent profit warning.
Kemira issued a negative profit warning this morning. The new guidance expects both revenue and operational EBITDA to remain slightly below the comparison period at the midpoint of the guidance ranges. Our forecasts, on the other hand, are slightly above the midpoints of the updated guidance ranges. Concurrently, the company provided preliminary information regarding the operational figures for the Q2 results. Due to the profit warning and the preliminary Q2 information, there will likely be downward pressure on our current year’s forecasts, and we will be updating our forecasts shortly.
Here is Petri’s pre-earnings report as Kemira releases its Q2 results on Friday.
Due to the company’s recently issued profit warning and preliminary Q2 figures, there is no surprise element associated with the operating result. The subdued market situation, along with a significant currency headwind, weighs on short-term development, but despite this, Kemira’s profitability has remained approximately at our expected level. We made only minor forecast changes in connection with the report, so, in line with a still moderate valuation picture, we reiterate our target price of 20.5 euros and our Add recommendation.
…Kemira’s stability, high-level expertise, and investments in sustainable development solutions make it an attractive option for long-term investors in the chemical industry’s global transformation…
This raises the question of what this “global transformation” ultimately means in practice…
A so-called “orange market disruption”, perhaps..?
(=it is not, however, currently built on a very sustainable foundation)
5 million shares, i.e., just over 3% of the total outstanding shares, and these are not used for management compensation but are cancelled. This will likely offer some support for correcting the share price downturn(?)
Petri has been busy on Saturday morning and has completed the company report after Q2.
Quoted from the report:
In our forecasts, earnings growth in the coming years is built on moderate organic revenue growth and relatively stable profitability development. Therefore, our forecasts do not include expectations of significant profitability improvement in Packaging & Hygiene Solutions. We believe that overcoming the simmering profitability challenges, especially in APAC, will be difficult given the nature of the market and the growth required for profitability improvement. However, the average operational EBITDA margins of 19.3% for 2026-2028e are a good level for Kemira, and they are also firmly within the company’s financial target (18-21%).
Here’s SalkunRakentaja’s article about Kemira; for those who have followed the company more closely, there shouldn’t be anything significantly new, but otherwise it’s a good and concise article.
Kemira is an analyst favorite. According to data collected by Vara Research, five out of six analysts give the stock either an add or buy recommendation. One analyst’s recommendation is hold.
This is despite the fact that Kemira’s second quarter did not go perfectly.
Subheadings:
Goal to double water treatment business
Major expansion in water treatment production capacity
Petri is having pre-drinks because Kemira is releasing its Q3 report on Friday morning, so now is not the time to go to Torstaikalla.
*The company’s revenue is expected to have decreased slightly from the comparison period, reflecting particularly the subdued demand for packaging materials
Kemira Oyj’s Interim Report January-September 2025: Good Profitability in a Weakened Market Situation
Third Quarter 2025
Revenue decreased by 5% to EUR 687.7 million (727.6). Revenue in local currencies, excluding acquisitions and divestments, decreased by 3%.
Revenue decreased in all three business units, mainly due to market softness and currency effects.
Sales volumes decreased compared to the corresponding period last year, while sales prices remained stable. Sales volumes increased compared to the previous quarter.
Operational EBITDA decreased by 7% to EUR 137.3 million (147.4). The operational EBITDA margin was 20.0% (20.3%).
The Water Solutions business unit’s operational EBITDA margin remained strong at 23.1% (23.3%). The Packaging & Hygiene Solutions business unit’s operational EBITDA margin improved to 13.6% (11.8%), and the Fiber Essentials business unit’s operational EBITDA margin decreased to 24.1% (28.2%).
EBITDA was EUR 134.4 million (142.9). The EBITDA margin was 19.5% (19.6%).
Operational EBIT decreased by 13% to EUR 87.8 million (100.8). The operational EBIT margin was 12.8% (13.9%).
EBIT decreased by 12% to EUR 84.9 million (96.3).
Cash flow from operations was EUR 132.2 million (112.2).
Petri just finished Kemira’s Q3 company report, hoping for evening, Sunday, night, and overtime compensation.
Kemira’s Q3 report was quite neutral, as a larger-than-expected decline in revenue was compensated by better-than-anticipated profitability. We expect the company to return to growth next year as demand in its customer sectors picks up, but earnings growth to be moderate as profitability improvement remains challenging. In line with this and a neutral valuation, our estimated return expectation is approximately at the required rate of return, so we lower our recommendation to Reduce (previously Add) and revise our target price to EUR 21.5 (previously EUR 20.5), reflecting slightly increased forecasts for next year.
I think Kemira could well be given slightly higher multiples compared to its history. However, the historical figures are influenced by the earlier divestment of the oil business, which was more cyclical than the current divisions. Nevertheless, I believe that for this to materialize, it would require the water segment’s share of revenue to rise above 50%, and the entire group to return to revenue growth (and thereby improving the bottom line).
