BA Pulp & Paper Chemicals

(1)

BA Pulp & Paper Chemicals

Lauri Junnila

President of Pulp & Paper Chemicals

Capital Markets Day

12 September 2006

2

BA Pulp & Paper Chemicals Strategy

Vision Statement

We are the Leading Supplier of Chemicals and

Chemical Solutions to the Pulp and Paper Industry

Covering the Entire Value Chain from Pulp

to Coater Globally

(2)

3

BA Pulp & Paper Chemicals Strategy

Key Elements of our Strategy

Managing a fast growing globally

leading business

Fundamental shift from country

driven organisation to competence

driven global structure

Strong penetration into Emerging

Markets

Building a globally leading highly

synergistic PPC Business portfolio

with emphasis on Total Chemical

offering

Active participation in industry

consolidation

Strong emphasis on R&D and

competence development

4

Product & Product Total concepts Service Groups & incl. responsibility

Service Country organization Product Line organization Business organization (sales, R&D, production) _{Increase in} complexity, risk and reward Selling competenceÎ The Business ”owns” the customer Selling productsÎ The Country Manager ”owns” the customer

BA Pulp & Paper Chemicals Strategy

(3)

5

Paper

making

Coating

Pulping &

Bleaching

• Process Chemicals

• Retention Chemicals • Deposit Control Agents • Defoamers

• Water Treatment Chemicals • Deinking Chemicals

• Functional Chemicals

• Sizing Chemicals

• Wet & Dry Strength Chem. • Fluorescent Whitening Agents • Colorants

• Fillers

• Calcium Sulfate • Titanium Dioxide

• Coating Pigments

• Calcium Sulfate • Titanium Dioxide

• Additives

• Dispersants • Preservatives

• Pulping

• Sodium Hydroxide (Caustic Soda) • Sulfuric Acid

• Defoamers

• Deposit Control Agents

• Bleaching

•

Sodium Chlorate • Chlorine Dioxide • Hydrogen Peroxide • Dithionite • Sulfuric Acid • Sulfur Dioxide • Peracetic Acid • Additives

Product Offering Today

6

BA Pulp & Paper Chemicals Strategy

PPC Global Coverage

62 Locations in 34 countries Sales and Service: 44 locations Production: 33 sites

Europe

• Revenue in 2005 Meur 590 (55.1%) • Employees 1500 • Factories: 19

Asia

• Revenue in 2005 Meur 50 (4.7%) • Employees 95 • Factories: 2

Americas

• Revenue in 2005 Meur 430 (40.2%) • Employees 814 • Factories: 11+1

(4)

7

Customer Kemira

BA Pulp & Paper Chemicals Strategy

PPC Global Coverage

8

BA Pulp & Paper Chemicals

Sales & Personnel by SBU & Region

PPC Revenue Meur 2005 Pro Forma Revenue Personnel Europe 350 663 210 771 30 51 590 1500 N-A 80 145 240 478 70 136 390 759 S-A 10 15 30 53 2 40 70 Asia 20 55 30 40 50 95 Total 460 878 510 1342 100 189 1070 2424 BA PPC Pigments & Additives

Pulp Chemicals

Revenue Personnel

Revenue Personnel Revenue Personnel

(5)

9 0 100 200 300 400 500 600 700 800 02 03 04 05 06

Q1

Q2

Q3

Q4

Financial Development

EBIT & ROCE

The figures are not fully comparable.

Revenue

0 10 20 30 40 50 60 70 02 03 04 05 06 0 5 10 15 20 EBIT % ROCE MEUR MEUR

%

10

BA Pulp & Paper Chemicals

Key Customers

We serve world class pulp and paper producers globally

World Top 10 producers have 27% share of total PPC sales

(6)

11

Acquisition of Lanxess

Kemira #1 in Pulp & Paper Chemicals

Situation in total

Ciba

900 MEUR

Kemira

739 Akzo Nobel

750 BASF

730 Hercules

730 Dow

670 Nalco

550 Situation after the acquisition

Kemira

1070 MEUR

Ciba

900 Akzo Nobel

750 BASF

730 Hercules

730 Dow

670 Nalco

550

Process & Functional wet end chemicals

Hercules

710 MEUR

Ciba

580 Nalco

475 BASF

270 EKA 265

Kemira 270

Lanxess

240

Situation after the acquisition

Hercules

710 MEUR

Ciba

580 Kemira

510 Nalco

475 BASF

270 EKA

265 Clariant

260

12

Acquisition of Lanxess

Milestones

People:

9 All key people retained

9 Highly-motivated and skillfull team joined Kemira

9 Headcount reduction actions progressing as planned

9 Global roadshow conducted prior to the closure

Customers:

9 Smooth transfer 1 April

9 No customers lost

9 New business from Far East and South America

9 Kemira PPC now more global than our global customers

Financials:

9 Business performing better than estimated

9 Annual synergies coming faster than estimated (€ 8million/20 million achieved)

9 Synergy costs lower 2006 than estimated

9 No impact on Kemira Oyj EPS in 2006

Integration:

9 High focus on supply chain

9 After 5 months business is becoming as usual

9 In-house M&A and integration model in place

(7)

13

Chemical Cost of Different Paper Grades

Market Growth* 1.4% 2.7% 1.3% 2.4% 2.7% 1.8%

* Jaakko Pöyry

Kemira management est. 0 20 40 60 80 100 120 140 160 180

Newsprint Kraftliner SC UWF CWF LWC

Eur /t o n Pulp Chemicals Paper Chemicals Kemira Portfolio 14

+ Increasing the usage of P&P chemicals + More complicated chemistry

+ Process chemicals even more important (higher OEE )

- Customer profitability decline

+ Bigger P&P chemicals companies have stronger R&D resources for new solutions

- Oil based chemicals profitability

+ Opportunity for outsourcing (total solutions) and cost benefits for customers

- Pressure on all costs incl. chemicals

Consolidate in mature markets & Invest for growth in emerging markets

Business Drivers

General Trends

⇨Lighter paper, more fillers

⇨Continuous increase in paper quality

⇨More recycled fibre as raw material

⇨Less fresh water used in process

⇨Energy prices going up

⇨Oil prices going up

⇨Growth in emerging markets

⇨Paper industry faced with profitability challenges

(8)

15

50

0.7 > 5

8

4.9

3.5

6.2

8.7

3.8

8

1.5

2.5

Growth Rate % 2005-2015

21700

1150

6300

6750

Market size 2005, M€

1070

1

Total

40 > 5

South America

390

2

North America

590

2

Europe Market share % / value (M€) PPC’s Market Position Region Asia RoW 7000 500

Market Position

By Region

16

Market Position

PPC has the best Integrated Portfolio*

Product Groups Kemira Ciba Hercules Eka BASF Dow Nalco Clariant Buckman Process Chemicals

Sizing & Wet Strength Colorants Bleaching Coating

Net Sales 1070 900 800 750 730 670 550 260 250

Market Presence small medium

strong

Pulp & Paper Chemicals Suppliers

(9)

17

Vision Statement

The Leading Supplier of Chemicals and Chemical

Solutions to the Global Pulp and Paper Industry

Managing a fast growing globally leading business

The entire Value Chain from Pulp to Coater

Build a globally leading highly synergistic PPC Business portfolio Strong penetration into Emerging Markets 18

Global Precence

Business Description - Summary

Potential for capturing the benefits of scale and presence

Strongest Integrated Portfolio

Paper making Coating Pulping & Bleaching • Process Chemicals • Retention Chemicals • Deposit Control Agents • Defoamers • Water Treatment Chemicals • Deinking Chemicals

• Functional Chemicals

• Sizing Chemicals • Wet & Dry Strength Chem. • Fluorescent Whitening Agents • Colorants • Fillers • Calcium Sulfate • Titanium Dioxide • Coating Pigments • Calcium Sulfate • Titanium Dioxide • Additives • Dispersants • Preservatives • Pulping

• Sodium Hydroxide (Caustic Soda)

• Sulfuric Acid • Defoamers • Deposit Control Agents • Bleaching •Sodium Chlorate • Chlorine Dioxide • Hydrogen Peroxide • Dithionite • Sulfuric Acid • Sulfur Dioxide • Peracetic Acid • Additives Growth Rate: 8% 11% 40% MEUR

Performance

0 100 200 300 400 500 600 700 800 900 1000 1100 '90 '91 '92'93 '94'95 '96'97 '98 '99'00 '01 '02'03 '04 '05B'06

Kemira Pulp & Paper Chemicals Sales Development 1990 - 2005

(10)