Kemira Oyj - Company Profile, Information, Business Description, History, Background Information on Kemira Oyj

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Company Perspectives:

We aim to be: the leading chemical and integrated service provider for the pulp & paper industry; the world leader in chemical water purification; a leading European paint and coatings company; a world-class performer in industrial chemicals.

History of Kemira Oyj

Finland's Kemira Oyj is a leading industrial chemicals manufacturer focused on four primary areas: Paints and Coatings; Pulp and Paper Chemicals; Industrial Chemicals; and coagulants and other chemicals for water treatment processes. Pulp and Paper Chemicals represents the group's largest division, generating 33 percent of the group's revenues of EUR 1.69 billion ($2.1 billion) in 2004. This division produces chemicals for bleaching, coating, and processing pulp and paper, as well as pigments and inks used in printing. Kemira's next largest division is its Paints and Coatings division, the Nordic region's largest producer of paints and related products, and one of the top paint manufacturers in Europe. The company's main brands, including Tikkurila, Alcro, and Beckers, combine to generate 25 percent of Kemira's total sales. Under Industrial Chemicals, which adds 19 percent to group revenues, Kemira includes titanium dioxide, formic acid and derivatives, and bleaching agents for detergents. Kemwater is the company's division dedicated to the production of coagulants and other chemicals for water treatment, and generates 17 percent of total sales. In 2004, Kemira spun off its then-largest division, Kemira GrowHow, as an independent, publicly listed company. GrowHow was the holding company for Kemira's agro-chemicals division. The company intends to develop its remaining subsidiaries into world leaders in their categories, through both organic growth and an ongoing acquisition program. In February 2005, for example, the company acquired Finnish Chemicals Oy, a producer of chemicals for pulp and paper, water treatment, and other industries; and Verdugt, based in The Netherlands, and the world's top producer of organic salts. Kemira, formerly controlled by the Finnish government, is listed on the Helsinki Stock Exchange.

Finnish Phosphate Start-up in the 1920s

Finland's independence from Russian domination following World War I presented new challenges for the country. In particular, the new Finnish government sought to establish self-sufficiency for the country's agricultural and industrial sectors. In order to supply the raw materials needed for the development of these sectors, the government targeted the creation of a domestic industrial chemicals industry. Among the earliest components of this strategy was Valtion Rikkihappo-ja Superfosfaattitehtaat Oy, or the State Sulfuric Acid and Superphosphate Plants, established in 1920. One of the new plant's first and largest customers was the state-owned gunpowder production plant in Vihtavuori.

Construction began on a sulfuric acid plant in Lappeenranta, and, in Kotka, a production facility for superphosphates. Both factories were completed in 1922, and before the end of the decade had achieved production levels of 20,000 tons of sulfuric acid and as much as 40,000 tons of superphosphates per year. While producing for a variety of industries, the two plants targeted especially the country's agricultural sector, with a particular focus on the production of fertilizers. In 1931, the two plants were incorporated into a single limited company. Nevertheless, the new company remained under government ownership, placed under the Ministry of Agriculture.

The strong growth in the demand for superphosphates at the end of the 1930s led the company to build two new plants into the 1940s. The first of these was built in Kokkola in 1945, and produced sulfuric acid as well as superphosphates. Construction began on the second in Harjavalta in 1947, with production launched in 1949. In the meantime, the company had made its first acquisition, of the Vihtavuori plant, in 1945. This facility was then merged with a Vaasa-based company that produced gas masks and other protective equipment.

Into the 1950s, the company expanded its focus to include more complex products, such as granulated fertilizers. The company also began an expansion into industrial chemicals as well, later emerging as a leading producer of formic acid and derivatives, and titanium dioxide, an important paint component. In the meantime, new sulfuric acid capacity was added at the Harjavalta site, with two new plants built in 1955 and 1957. The company's Vihtavuori subsidiary in the meantime expanded its explosive operations with the completion of a new plant for manufacturing dynamite in 1957.

The state-owned company simplified its name, to Rikkihappo, in 1961. The following year, the company added a new sulfuric acid facility in Kokkola, which enabled it to shut down its original Lappeenranta site in 1963. The company continued to expand its production of sulfuric acid through the 1960s and into the 1970s, with major extensions accomplished in 1967 and 1974 at Kokkola, and in 1970 and 1975 at Harjavalta.

Harjavalta and Kokkola were also central to Rikkihappo's extension into the production of heavy industrial chemicals. The company first built an aluminum sulphate plant in 1960 in Harjavalta, which was followed by the addition of a calcium chloride and sodium sulfate production facility in Kokkola in 1962. During the 1960s, the company also began producing concentrated granular fertilizers, at a new purpose-built plant in Uusikaupunki, starting in 1963. The new plant also featured its own harbor, becoming part of the group's move onto the international market.

Exports of fertilizers were launched toward the late 1960s, backed by the addition of several new plants in Siiklinjarvi. The first of these, a sulfuric acid plant, was completed in 1967. By 1972, the company had added a phosphoric acid factory, and new factories for producing ammonium phosphate, nitric acid, and complex fertilizers. The company also built a new inland waterway harbor linking its Siiklinjarvi site to the coast. The development of this new capacity enabled the company to shut down its original Kotka plant in 1973.

Diversified Agro-Chemicals Leader in the 1980s

The adoption of a new acquisition-driven growth strategy, starting in the 1960s, transformed the company into one of Finland's largest corporations and into a leading chemicals group in the Nordic region. One of the group's earliest acquisitions was that of Vuorikemia, which produced titanium dioxide-based pigments. That purchase, made in 1968, permitted the group to extend itself into finished paint and dye products and also became one of its earliest avenues to the export market. Another significant acquisition came in 1971, when the company acquired Typpi Oy. Founded in Oulu in 1952, this company added the production of nitrogen-based chemicals to the company's list.

The addition of Typpi's business also led to the adoption of a new name for the increasingly diversified chemicals group. In 1972, the company changed its name to Kemira--using the initial letters of the Finnish words for its three main areas of operation, Ke (chemicals), Mi (minerals), and Ra (fertilizers).

Through the end of the 1970s, Kemira continued to add to its domestic operations. In 1972, the company acquired a paint manufacturing plant from Oy Schildt & Hallberg AB. The new subsidiary, Tikkurilan Varitehtaat Oy, gave Kemira the Tikkurila brand, one of the leading paint brands in the Nordic region. The addition of the brand and a developing focus on the export market led Kemira to begin establishing a network of foreign sales subsidiaries starting in the late 1970s.

Through the 1980s, Kemira continued to expand domestically. In 1980, the company opened an apatite mine in Siilinjarvi. The company expanded into formic acid production with the construction of a plant in Oulu, and then added an ammonia plant, and a factory for the production of hydrogen peroxide, in 1988. The company also branched out into fine chemicals with the launch of a new plant at its Kokkola site.

Yet international growth became a company priority during the 1980s as well. For this effort, Kemira focused especially on developing its fertilizer and agricultural chemicals operations--which continued to account for more than 50 percent of company revenues into the 1990s. One of the group's first acquisitions came in 1982, when it purchased a fertilizer factory in the United Kingdom. In 1984, the company moved into The Netherlands, buying a fertilizer plant there, then increased its presence on the European continent the following year with the acquisition of the Gechem fertilizer factory, in Belgium. In 1987, the company added Denmark's Superfos Godning, followed by Pernis, in The Netherlands, and Ince, in the United Kingdom, in 1988. By the end of the decade, Kemira's fertilizer operations were the second largest in Europe.

Other Kemira operations expanded internationally during this time, notably with the 1984 acquisition of the Donald Macpherson Group, in the United States. The following year, Kemira returned to the United States in order to acquire a titanium dioxide production facility. In 1989, the company's chemicals division quadrupled in size with the acquisition of Boliden Kemi, based in Sweden. Also that year, Kemira entered the Far East, setting up a hydrogen peroxide production joint venture with Japan's UBE Industries. By then, the company also had developed a growing specialty in producing chemicals for the water treatment sector. In 1991 and 1992, the company boosted that business area with the addition of Aliada Quimica, in Portugal, and Kemira Iberica in Spain.

Kemira's rapid expansion during the 1980s had come at the cost of taking on a high debt load, however. Kemira's status as a state-owned company restricted it from turning to the stock market for capital; instead, the company was forced to turn to banks to finance its expansion. The company originally requested that it be allowed to go public in 1984. That request was denied. By 1989, however, the Finnish government had agreed to an offering--yet a dramatic slump in the global chemicals industry forced Kemira to put its public offering on hold. The company's fertilizer division was particularly hard hit, and entered a protracted period of losses in the early 1990s. Nonetheless, Kemira made a new attempt at growth, launching a takeover offer for the fertilizer division of troubled British company ICI. Kemira's offer was blocked by the United Kingdom's monopolies commission, however.

Refocused for a New Century

By 1991, Kemira was forced to restructure its operations. In that year, the company reformed its operations into a number of wholly owned subsidiaries, including Kemira Agro, Kemira Chemicals, Kemira Fibres, Kemira Pigments, Kemira Metalkat, Kemira Safety, Kemira Engineering, and the Tikkurila paint operations. As part of the company's restructuring effort, it shed some 28 percent of its payroll. The restructuring took place ahead of Kemira's public offering, which at last came off in 1994. Kemira's listing came as part of a wider Finnish government privatization plan that also resulted in the public offering for telecommunications giant Nokia.

Kemira's appetite for acquisitions remained strong through the 1990s and into the next decade. The company's target turned especially toward its chemicals and pigments divisions. During this period, Kemira emerged as a world leader in water treatment chemicals, with the 1992 acquisition of Ferriklor AB of Sweden, and the creation of joint ventures in Romania, The Netherlands, Poland, the Czech Republic in 1994, Thailand in 1995, and Brazil in 1996.

Meanwhile, Kemira's pigment division grew in 1993 through the purchases of a 20 percent stake in the Nord Kaolin Company, in the United States, and of TCF Tiofine, a titanium dioxide producer in The Netherlands. The company also expanded its paints and pigment operations into Latvia, Russia, Estonia, Brazil, and, with the creation of Tikkurila Inc. in 1996, the United States. That year also marked the group's entry into the Australian pigments industry.

Kemira launched a new strategic review at the end of the 1990s and in 1999 announced its decision to refocus itself around three core businesses--pulp and paper chemicals, paints and pigments, and water treatment chemicals. By 2001, the company had launched an active divestment program, cutting out some one-third of its operating revenues. As part of its new strategy, Kemira once again began seeking acquisitions. In 2001, the company boosted its paints operations with the acquisition of Sweden's Alcro Beckers, originally founded in Sweden in 1865. That purchase made Kemira the Scandinavian region's largest paint manufacturer.

Kemira's independence appeared in doubt later that year when Industri Kapital, behind the creation of Nordic chemicals giant Dynea, approached Kemira with a takeover offer that would have created a global chemicals giant with sales of more than EUR 25 billion. That offer failed, however. Instead, Kemira announced its intention to find a buyer for its Kemira Agro division. Yet the difficult economic situation at the beginning of the century put that effort on hold as well. Kemira Agro was then renamed as Kemira GrowHow.

The spinoff of GrowHow came at the end of 2004, when the newly independent company was listed on the Helsinki Stock Exchange. Kemira had in the meantime continued to boost its other operations through a series of acquisitions. Nonetheless, the spinoff of GrowHow shaved off some EUR 1 billion from Kemira's annual revenues.

The streamlined Kemira entered 2005 off and running. In February of that year the company made two significant acquisitions. The first of these was of rival Finnish Chemicals, which presented an operation portfolio similar to Kemira's own. The second was of The Netherlands' Verdugt, one of the world's top producers of formic acid and other organic salts. Lean and mean, Kemira turned toward the challenges of the new century.

Principal Subsidiaries: A/S Ammonia (Denmark); Alcro-Beckers Barvy Tjeckien (Czech Republic); Aluminum Sulphate Co. of Egypt, S.A.E. (Egypt); Biolchim Tunisie; CPS Color Group Oy; DA Kemikaalide AS (Estonia); Farmit Website Oy; Färgsam AB (Sweden); Haapaveden Puhdistamo Oy; Indkoebsselskabet for Kali I/S (Denmark); KemMaq L.L.C. (United States); Kemax B.V. (Netherlands); Kemira Arab Potash Company (Jordan); Kemira Compound Fertiliser (Zhanjiang) Co. Ltd. (China); Kemira Emirates Fertilizers Company (Kefco) (United Arab Emirates); Kay Fertilizer Sdn. Bhd. (Malaysia); Kemira GrowHow (Thailand) Ltd.; Kemwater Phil. Corporation (Philippines); Movere Oy; Pharmatory Oy; PK Düngerhandelsgesellschaft GmbH (Germany); Scanspac & Co. AB (Sweden); Scanspac AB (Sweden); SECO Fertilisants S.A. (France); Superstar Fertilizers Co. Ltd. (Thailand); Swede Pavimenta S.a.s di Carazza & Co. (Italy); Swedish Water Corporation AB; Union Kemira Company L.L.C. (United Arab Emirates).

Principal Competitors: BASF AG; Dow Chemical Company; BP Amoco Chemical Company; Bayer AG; E.I. du Pont de Nemours and Company; Norsk Hydro ASA; ATOFINA; Merck KGaA; Shell Nederland B.V.; Mitsubishi Chemical Corporation; CEPSA.


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