Kemira's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Feb. 8.12 | About: Kemira Oyj (KMRAF)

Kemira Oyj (OTC:KMRAF) Q4 2011 Earnings Call February 8, 2012 3:00 AM ET

Executives

Tero Huovinen – IR

Harri Kerminen – President and CEO

Jyrki Mäki-Kala – CFO

Analysts

Mikael Doepel – Svenska Handelsbanken

Peter Mackey – Morgan Stanley & Co.

Operator

(Operator Instructions). Just to advise you, there will be a question-and-answer session after the presentation today.

(Operator Instructions)

Unidentified Company Representative

So good morning and welcome to Kemira Oyj's presentation for fourth quarter and full year 2011. My name is Tero Huovinen, responsible for Investor Relations. With me today I have Kemira' President and CEO, Harri Kerminen and CFO Jyrki Mäki-Kala. And we will start with presentation and then open up for questions from the floor and from the conference call. So let's start with Harri.

Harri Kerminen

Good morning everybody. I am the CEO. Again here, so other than to a brief day last year 2011, (inaudible) than we really as always can have a discussion section. So headline is growth in the water chemistry business in 2011 and let's go right away to this big picture of what happened last year and looking at from Kemira Group point of view. So we had to first of all slight revenue increase where our real water business grew anyway by 6%. Of this I am personally happy about that and that we need to understand that currencies and divestments especially in the bank business had a negative impact in revenue growth. If it planted above 158 million euros slight improvement from year 2010 and what was typical for last year almost in any industry for this specially in chemical industry, in the beginning of the year we really have the tendencies of what quickly increased raw material prices and cost that finally looking at the full year we had an 88 billion euros increase from their cost that basically from a full a fully compensate it by own price in itself, it's an increase that I am also happy with.

Then we have this 6 million euros currency exchange and divestments that have a negative impact in our EBIT and our operative EBIT percentage went down a bit to 7.1%. I rather comeback later on a little bit explaining that than what we are going to do to increase that to a (inaudible) level.

Earnings per share increased by 22% to a record high level gaining to a share upon 9 euros per share. We have very good cash flow operation of cash flow again as a third year in row so that is increased by 34% to a level of 177 million euros.

And finally a report of a director proposed to the annual general meeting that dividend will be share upon 53 euros per share that this record in Kemira's history as well. So net income earnings per share dividend at the record high level.

So looking at the operational highlights in 2011 by segment starting with paper, we more and more are focusing on serving packaging board and tissue industries and especially tissue customers are relative to new customers settling for Kemira that we successfully had a transit here in 2011 and we certainly compensate it increase on their cost by own price initiatives and price increases. That's roughly the picture of paper. We have the demand drop in here in Q4 but I will compact it later on, that we recorded in somewhere in the mid of November.

In most experienced industrial part where about 50% is serving cities and municipalities and 50% are serving different industries outside oil and mining and paper industry actually remember. We have also here with challenges raw material cost, cost of the especially in industry are partly compensated very well and we had also some growth in industrial part. We have challenges in municipal serving municipalities especially in during Q4 that I can come back again later on.

We have had and we are going to do site consolidation in North America in Europe that will help in the Q3 to grow profitability and increase our cost deficiency as well and we are more and more using recycle geometry real and we are looking at more longer term and cost effective raw material contacts especially North American and Europe there are our main businesses.

On a mining business process it’s a success story. So we started the business in 2008 and we have every year improved profitability, improved net profit and EBIT and also we have been growing every year and especially last year we had a good penetration so call in unconventional all our cash business, especially North America for this insane cash. So that every financial ratio was very good in 2011 and I believe that will continue also in the future.

Finally, and this is very important. Personally extremely habit that when we start it, our so called speed programming in spring 2010 and at this focusing on building quarter competencies in Kemira with our boldness but also of course the final aim is to develop new applications and new products that in 2011 we have more than 40 million euros yield sales based on this speed program with good marching. And so every segment has better outcome that was our internal target in 2010 and this is the area where we can really differentiate ourselves in the future and building a unique position in water business. There by the way I personally calculate that we have the second biggest n the world at the moment and then we can differentiate our self-having a wide product pallet focusing on application and solving really customer problems. I really see that this is the key element to be successful in the future also in long-term in this growing quarter business. It has to be remembered is 500 billion euros business we are relevant market product Kemira is close to 30 million euros and we have now about 2 billion euros business, so there is lot of growth for themselves for Kemira.

I will only look at from this like the numbers by segment 2011 compared to 2010 and if you look at the (inaudible) so the revenue is about the same level as the previous year as after EBIT. That this is relatively good achievement recognizing the tough market conditions during the full year. Municipal, industrial if you look at the revenue, revenue was a little bit higher but EBIT was lower and certainly this big level that we landed in 2011 is something that we need to focus on and improve in the future.

Industrial part is doing very well but we really have in serving municipalities by raw material cost but also we have the demand in Q4 that forecast in our Kemira sense in 2010. So that really happened, but I am still confident that we have a really long track record serving municipalities within last 15-10 years with an average cost 10% profitability. All among really (inaudible) is excellent. We have an operative EBIT improvement from 28 to 36 in euros and also that the operative percentage increased to close to 11% that is at a good level recognizing that we are growing at the same time.

It changed our strategy in 2008 focusing on water chemistry and water and when we started in 2008, we headed it's on a water business partly this is serving municipality facility but partly also serving paper industry and perhaps something else. Now we have successfully implemented our strategy in 2011 we have 78% of our revenues is coming from water chemistry. We are not targeting perhaps fully 100% because I don't think that any chemical company has even focusing on water has 100%. But it’s a nice trend and can be perhaps also even be higher in the future and this is based on the common technology and common product portfolio and serving selected markets company, that's their simple logic there and I still believe that this will be relevant in the future.

It's difficult in chemical industry that there is profitability in raw material costs that we have with you, it's based in inter-class in the previous year's many times and what we have been improving in inside Kemira is that we have been doing a lot of the understanding customer needs demand forecast and link them in real time raw material purchasing so that we have tried to really squeeze the time lack here with the sales price variable cost and so on and we can see that we have been doing very well already now like in 2011. This is very important so that we are not some cyclical company looking at profitability of profit. There will be some cycle all of this in any industry I guess but it should be somehow predictable and the predictability in as a stock listed company is important and being set on personally habitat we have been able to do this.

Now coming back to this EBIT profitability target 10% that I think we have a strong profit. We have a return of capital employed in every business better than return on invested capital or return of capital employed. So that business we have economic value added positive in every segment of these things are fine. The only thing is that this profitability still needs to be at group level to be improved and I have feel this lets say five, six years that of the key elements to do that. Certainly one element is the suite and building new products with an applications it's higher than 10 percentage. That will ask you very well and that trend will continue. So we have created an exposure where this is possible.

We are very much focusing on advanced pricing, value pricing in Kemira. We have a special project ongoing that we started in 2010 that it will be completed within one year so that is one element to be able to increase cross margin. We have this year 2012 about 100-200 different kind of productivity actions ongoing, one of them is mentioned here and is seeing improvement that we have now put also as a little bit visibility, it believes that this year 10 euros million savings can be implemented in 2011.

All in all this productivity needs to be improved by 3% per year. when we take also some other reasons there that I believe are key elements to improve profitability. Last year it might sound a small thing but in 2011 it didn’t even have BICC business space at all. In Q4 it was almost zero that we have never experienced really. So now looking at outside there is BICCs and ongoing. So that means we have come back to this old times and it is (inaudible).

The second thing is that this year we have started facilities production in China and India. We are also yielding a new globally merged scale production units in equivalent business in Spain and Germany. All these things will increase of course sales but also increase profitability.

And finally this municipal business, municipal industrial business certainly I believe it will improve profitability and profit this year and that's why all this reasons mentioned and listed here I believe that what we have guided today that Kemira's operative EBIT and net sales will slightly improve from 2011 in this year.

Cash flow was strong, we had a big growth sales almost 100 million screen last year but in December that's just our EVO power company sales from our pension fund with value 103 million euros so that compensated in this cash flow. Our cash flow was many years here even here 2003 and 2004 it was negative every year. We had a balance sheet, higher debt. Now this 2008 and we started this quarter strategy and many other things we have consolidated the company and this new Kemira cash flow has a positive and the trend will certainly go on. This year again cash flow for our organization is key, should be focused on.

This evident the board of directors is proposing to accelerating this year upon 50-53 it is a bit higher than last year and record high also in Kemira's history. So this trend is nice to look at that as well. So it's about 1 million euros meaning 60% of operative net profit. That is according to our dividend policy. So that dividend policy has not been changed, this is only according to that.

Is Q4 balancing that we said in November so we changed our guidance based on three years so we anticipated the business is not strong and it really didn’t even start before January 1/11. It happened. The thing was that especially Nordic countries and continental Europe part news have shut downs our customers later on also in December paper mills, 3% what we told in November just happened. Third element that first time in our history we have some volume demand in serving municipalities in Southern European countries especially in Spain in Central Eastern Europe like in Czech, Hungary and so on and then also in California, California is very important area for us. We have a very good markets here and (inaudible) is one of the biggest customers we have in Kemira looking at all customers. So those all and really dropped based on the financial restrictions partly and so on and they continue until the year end. We anyway we will be interested in what will happen if the deals are of course, that cannot be exactly but I personally believe that looking at our history serving those areas I believe that some volumes will come back sooner or later but we will see then that.

So this is more or less looking at the numbers, revenue about the same level. Slightly lower than earlier, but volumes we had lower.

So sales price increase is compensated the raw material cost of (inaudible) and that was the difference compared to the first quarter in 2011.

Operative EBIT, EBIT really landed at the level of 34 million, certainly in that way, a disappointment but according to our cash in net in November, we had put fixed cost management EBIT but we could, looking at costs in challenging environment, but we have realized this volume currencies.

Anyway, profit before tax increased to 60 million euros based on that our CO2 business was doing well. We have a limit American company called Rockford; we have a minority share of 9% of the company. We are not consolidating in the figures, in revenue and EBIT, but certainly, its associated company and we can see that in EBITDA.

So in that way, we had a very good, much better profit before tax compared to 2004 and certainly of course, net income as well.

And this shows the Q4 challenges, I only will pick up the sales volume prices and variable costs, because variable costs increase, still 24 million, but was also, I think, for any industry, very challenging, because there was, I think, during summer, people expected little bit also of stabilizing raw material costs. This didn’t happen, so we could compensate only 12 million by sales volume and prices, but basically comes from price increases, and so the challenge here was really volumes in those areas that I already mentioned, just to give a big picture.

Paper segment, really especially for customers have lowered demand, we also have the divestment in November, our Hydrogen Peroxide business in Canada, so that naturally also decreased our sales and EBIT, but we had higher sales prices and basically this operative EBIT landed much less than previous years, based on these reasons.

Municipal and industry realities the recent spend I already explained, and this operative EBIT, 9 million is certainly not acceptable level in the future, but what I’ve said, I personally believe that it will be fixed later on, so this kind of level 5.14 is historically looking at serving the same customer base, the same product, portfolio is low, it’s very low, and can be increased.

Oil and Mining segment basically, better formed also in Q4, went well, pretty well operatively it increased by 30%, that is fine. And this is a business that you know that when energy price or cost is at the high level, our segments like municipal and industrial and paper are of course, it’s challenging in this business. The higher the energy price is the activities in our customer industry is of course, also high.

But anyway, that is only one reason the business is doing very well. And I’m really happy that when we depicted in 2008 focusing on water, that should be penetrate on this segment based on the fact that customer industries, demanding big companies, oil and gas service companies have big ones, also mining companies. We have demonstrated that the selection was very good.

So we have this good customer base and I think that as an example, those unconventional oil and gas activities is especially not America Kemira has filled an excellent position there. We are waiting two most important companies there. So that’s fine.

Chem solution had a good profitability again. It’s a very good cash flow generator. We have this key eye thing is certainly a handicap otherwise the business was doing well, and it has been a stable business 2012, I believe it continues good profitability on business. So it’s stable, very well performing business.

There are some slides about some points of strategy implementation, not many but I would like to address and share with you. We have this strengthening position in key water in terms of industries that this of course, really critical for Kemira to be differentiate is there. We still can optimize our customer product portfolio that is by the way still again one key element to increase profitability.

Technological renewal and growth in those growing areas. We have selected three segments, Basically this is water and energy efficiencies is key element. From our point of view, it is based on saying technology base and from our product lines serving these three areas, where paper for us is serving a 10 billion euros market potential. We are more and more focused on recycling. Water chemistry is new perhaps in emerging markets, and they have a good market position in selected areas.

And the soil and mining certainly new business, you don’t have so good position like in paper but it’s improving. Some cases number one. Some cases number four, between. It’s a demanding business where our applications are the most demanding and partly also explains the good profitability.

Water has always had an increased role. Again why we are here is that when the people drill one gallon oil in not like in oversea or Mexico, it normally takes seven to 12 times more water. So that’s why the water is basic. Water is the thing. Unconventional areas, water is in my mind even more important. So that’s why the water is a real water business, it’s very demanding and that its serving cities and municipalities still our important business.

We need to increase our profitability there what has been good that we have building in the industrial part of that it has been more or more base application rather than selling product and the business, the potential is 10 billion euros as well.

Two slides concerning production side, mostly we are producing our production, through our own production sides partly also own product but this is also looking at the profitability and efficiency critical. We have at the moment 74 sites, we are not so big company but we have many products and units.

We have closed 25 sites in the previous years and so that we are more invested last quarter chemical production units, we have also closed small sites non-profitable sites and we have also as the third element stepped out some markets, like we have stepped out of Japan, Korea and somewhere else as well like now in Canada basically in the end of last year where you don’t see from Kemira’s point of view 10% business possible in long term.

So we have been treating our side that waterlog, the second slide demonstrates this more equivalent business that are mostly are used for municipalities partly as fixing chemicals to paper industry as well but this is more in municipalities and cities and we have done also exiting many sides here and now we are building a global scale of production units in Spain also in Germany here we are opening a new facility in India soon.

By the way we are also announcing a bigger chemical hub that serves all our customer segments that will be ready during this year as well what I said earlier I am sorry.

So this is also important that and key and critical element to be able to achieve and compact this 10% EBIT level in serving municipalities. We have a first long term and good raw material, contracts for Kemira and more are now using recycle. Recycling in Europe and North America is getting bigger and bigger every year but it also means that we need to run new our production network.

Still two slides I guess, this week program, I already told it's also a critical to be able to implement our water chemistry strategic especially in 2011 when we generate the more than 40 million euros in new business. It's under scale and buyer side and new business, dissemination that we have discussed with your earlier. So new product new applications and something else what is perhaps the most in critical areas.

More than 100 invention disclosures last year and 40 patent fillings and so they are very interesting and now see I think very nice though that we have one third of Kemira portfolio in New York since 2008. So this demonstrate that we have been very active in the field and in good company organic growth and having a renewable product portfolio and focus on application of course that’s a clear thing that kind of culture is an indication of good company and we have a partnership network.

Finally there is some other type of things, there is a picture of healthy lake, and (inaudible) lake. We have restored 20 lakes with chemical adulteration in Finland. The large one was (inaudible) and now we have got a new deal and the first million in South America, a big deal in Brazil.

So that is altering the Brazilian market. So it is somewhere between 5 million euros to 10 million euros in Chernobyl. Another sample to have something that no other company has, we start with serving cities and municipalities in ’99 in China and I was personally building the first JV in close to Shanghai and basically it's based on profitability and we have invested sold or closed those activities. We have now started again serving a different product pallet based on application focus municipal business in China.

And we have now got new contracts with Shanghai, Hong Kong, and (inaudible) during last weeks. So it's a new start, nice story, but the business is very, very different but it appears to be earlier in big. In China, we opened a reception table on consent that we will have a big business delegation in next week in Brazil, we will be part of that where we will meet high level big customers in different industries in Brazil that we have developed.

And finally this is our requirement so that in the end, the uncertainty in Europe and a slowdown in global economic may affect the demand for our products in customer industries, however in 2012 Kemira expects the revenue profitability to be slightly higher than in 2011 based on the reasons that I have tried to explain earlier in my presentation. So I stop here and now it's starting. Thanks very much it's time for questions, if any.

Question-and-Answer Session

Tero Huovinen

We are ready to take questions now, and let’s start from the floor. Please use the mike and state your name and company.

Unidentified Analyst

(inaudible) I have two questions, first about the new production facility that you said you are adding this year, could you perhaps quantify the impact and why this really improve your earnings, will you expect to gain markets there in those markets or will those production facilities replace in ports or some those effective production. And second question about raw materials, how do you see their raw material cost, outflow currently, many of your raw materials are oil derivatives and oil price is high, looks like they will stay there so from which ones do you expect really to comment, if you could comment on that.

Harri Kerminen

First one they have not disclosed the sales and profitability from those you know those assets and the one reason is that it takes some time to ramp up, startup the units but they specially the sign as to announcing is a bigger. It will replace partly import from Europe and North America. So in that way it will improve our profitability but it also will increase our sales because now when we do not have in those product lines localized production so looking at the profitability we cannot tell in how to in a sensible way everything.

So these two reasons are there in the background. India case is serving both municipalities and also industrial, we don’t have basically any real production in India at all so it opens new area. Looking at raw material costs we have reduced our oil related how to say products all the time so it's I think it is Jyrki Mäki-Kala (ph) is the person out of this is not anymore so.

Yes it's less than 50% and I think that raw material for cost is what the market has, we have to use the same format prices for oil, propylene and ethylene that is general idea – knowledge, so that is how we go across.

Tero Huovinen

Thank you and next.

Mikael Doepel – Svenska Handelsbanken

Yes Mikael Doepel, Handelsbanken, couple of questions which in regard to guidance about more specifically. You mentioned that municipal business is one that definitely should improve this year, what will drive this improvement.

Harri Kerminen

It's basically is the list we have instantly, we have bond list, it's new product sales that is going through straight, we have had anyway successful price in this year is nearing 2011 we have this slight consideration in Europe and especially in Europe but this big business municipalities that’s one reason, and all these listed items that I mentioned earlier I think they are also relevant for municipalities that will improve the profit.

Mikael Doepel – Svenska Handelsbanken

What about the DEICING (ph) events and then the Q4 they are basically no earnings from where I am seeing. What is the typical level of DEICING (ph) earnings for in the fourth quarter?

Harri Kerminen

We haven’t disclosed what can we say that we lost innovation with several millions. So it had an impact, several millions.

Mikael Doepel – Svenska Handelsbanken

They is one way towards the guidance, would you say that the guidance applies for Q1 as well?

Harri Kerminen

This is the full year guidance.

Mikael Doepel – Svenska Handelsbanken

But does it apply for Q1?

Harri Kerminen

Well we have guidance only full year, so I understand you are so eager to, but we say only this one this is all that is.

Tero Huovinen

Thanks, next question. If there are any questions in the call?

Operator

Last question comes from the line of Martin Evans (inaudible).

Unidentified Analyst

It's a similar question to the previous one, again just relating to your optimism over this year in terms of growing your earning slightly versus 2011. Just on, I can understand the emphasis the negative, Harri that you mentioned that affected in your Q4 but in terms of the volume situation and demand from your customers which did fall off very sharply in the fourth quarter and particularly obviously in paper in municipal. Do you see that demand coming back your order books at the moment, is there any visibility there, is there any restocking or we still quite depressed levels of demand and volume growth. Thanks.

Harri Kerminen

Thanks Martin. I understand the question very well, however I would say looking at the paper volumes I think that then our customers, big customers are coming out from the reserve. I think they are saying the best guidance for volumes and so on. Of course we have been certified customer portfolio in paper as well focusing more on PCO and packing and port. We are not going to go out and say an specific numbers in first months but it is likely of course there is no big sales in within some weeks in that business that is hopefully is very the likelihood is high and in municipalities I only can, I will not repeat what I said so this is the full year guidance and especially the municipal part of this municipal and industrial business I feel that doesn’t think that this is too definite for the full year is going to be better and also this what we discussed obviously so it hasn’t we have not disclosed normally and we are not going to disclose the business as such but it has what it mean in for Kemira.

Those numbers what I said it's not so minor. So that we are not going to give any number items for Q1 or Q2, the only thing is full year guidance.

Unidentified Analyst

Thank you and just very quickly follow-up on the DEICING, I am assuming it's very, very cold weather that we are all experiencing now in Europe in the same way it was negative been mild focused to show I am assuming having a very good strong first quarter on DEICING.

Harri Kerminen

Well it certainly now is a discussion, discussion that we had a also looking at are not picking to estimate or speculate amounts but last year also Q1 was seem to be the only month that really had a meaningful business in India in those months, whereas 2010 it was a record high. So we must happen to have this 2011 big year unless we have this will pay at least now it looks promising.

Tero Huovinen

Thanks is there any other questions from the call?

Operator

Our next question comes from the line of Peter Mackey. Please go ahead with your question.

Peter Mackey – Morgan Stanley & Co.

Firstly I have got a number of questions here, firstly in your slides you talked about a 12 million positive impact on EBIT from volume and pricing. But you talked in some detail about having managed your selling prices more aggressively in order to minimize the time lag between raw material and selling price changes.

Given that are you able in any way to give us a split of the EBIT impact of price increase versus volume decreases in the fourth quarter just to get an idea of the sort of operational gearing in fact you saw in fourth quarter and secondly on the other division, EBIT given your comment about the several millions of EBIT having been lost from a poor, deicing season if you had a normal deicing season you would have a spectacularly strong fourth quarter in the other division, obviously that’s a very volatile one on a quarterly basis. Could you give us some sort of guidance of a normal level of let’s say annual profitability or should we look at that on a full year basis rather than trying to understand the quarterly progression.

On municipal in terms of the volume declines in the fourth quarter how much of these do you think very short term issues, perhaps municipalities throwing down inventories and how much do you think there is a restocking of that may kick in at some stage, I mean are we talking about sustainability low levels of demand or just an unusual effect and finally can you give us some guidance on the tax rate please for 2012. Thank you.

Harri Kerminen

That amounts for four questions so I hopefully I remember, first one this 12 million in sales price in Q4 versus 24 million in variable cost increase so we are not going to give a full straight of this volume and prices and like I said already volumes had more, it was bigger and it made reason for the trough otherwise I will start my volumes had the biggest impact in Q4.

The second thing, there is another division and the deicing and so on we have not either disclosed deicing season but I said we lost several mediums I think that this whole office division if you call it, it has been relatively stable year-by-year but there are cyclicality inside the year and that’s the only, I believe that again based on all rationale know in that division I am confident it will have a good year in 2012 that’s the only thing what I can open.

Peter Mackey – Morgan Stanley & Co.

Could I just on that would it fair to say that the fourth quarter strength was a little bit of a catch up from a weak third quarter?

Harri Kerminen

I don’t think so that was the reason. The third question was that this municipal business and destocking and volumes there that really drove in Q4, again it's a big difficult to forecast what will happen but there are certainly some countries that the volumes stopping away that it's more waste water business by the way and not drinking water so don’t be how to say, so that I believe that volumes is certainly part we will come back because it's overall so big and might be the parts of reasons there but that’s the all I can forecast. Now let’s see we can see in coming months what will happen and then finally across the tax, our tax expert and we will comment that Jyrki, please.

Jyrki Mäki-Kala

About the wax items for 2012 and I think it's a long way to say while we have said earlier to 22 average for the whole group and if you look to 2011 the key area the tax rate was 60.5 basically of these week lower the profit coming from the associated companies the tax rate was 20.5 so we have basically along with the guidance.

Peter Mackey – Morgan Stanley & Co.

This new plans in Asia and just for that help just for your growth in emerging markets I think in 2011 was zero, can you give some background on that and then these new plans what’s going to ramp up do you expect, when do they start and when you expect break-even?

Harri Kerminen

I think the study concerning this Indian production unit is somewhere in early this year and Chinese production is a bit later on, we have several products there depends on what you are looking at that. So this year will not be the full year of course as a revenue, I believe that these production can be ramped up to maximum in a couple of months let’s say so.

While it's not impacting, full 2012 and concerning these emerging market growth you arrived that we didn’t have so much growth in 2011 and one reason it was that we need to really ship material to those countries from Europe and North America basically was at base is what you saw earlier and concerning the profitability and so I think that country is that we entirely growth in 2011.

But having our guidance that we are going to grow more than 7% in emerging market and 3% in elsewhere I believe that these totally do and we will be in the field and even 7% is not so very aggressive targeting looking that in 2030 it is expected that 60% of the world for the business are going to be in Asia. So Kemira needs to follow that trend but we need to have local resources, local reserves and development, technical service and at least preserve the next 10 production as well to be able to have this 10% business there.

Peter Mackey – Morgan Stanley & Co.

Thanks and second question about this POV addressing, what exactly did you acquired so which series of shares and what is the logic there, what kind of return do you expect and is this independent of this 10 million euros saving in energy?

Harri Kerminen

That is independent, that’s nothing to do with that because it is our pension fund has owned the shares so it's the energy saving on 10 million euros is really coming our production assets. We are kind of getting in different countries they have a different electricity and energy, so it's a 10 million euros is our production of POV related issue.

When we cope this fear we have not this close to say numbers and so on because it has to be maintain this all – it's one place in Kemira Group under ownership the POV shares and basically that’s the only, it has an old history why they look at our pension funds.

It comes from early 90s, originally they have beyond Kemira.

Peter Mackey – Morgan Stanley & Co.

So there is no earnings impact?

Harri Kerminen

Because there are some fees but it's a minor, so basically it's about the same. I have the negative either let’s say so.

Tero Huovinen

Is there any questions from the line?

Operator

We have no further questions at this time, sir.

Tero Huovinen

Thank you any more questions from floor?

Unidentified Analyst

Few questions firstly one on soft-level, doing a strategic review with options off these assets how will this proceeding now end, when can we expect to, hear something on this front?

Harri Kerminen

We are continuously, as we have earlier mentioned so that what we have said is that I think for Rockwood and Kemira last year was very good prices are still at the high level business is doing well. For instance the biggest GEO2 company account in U.S. they reported just lately that there was some b-stocking during year end some b-stocking used for customers, basically prices are at very good level looking at history. Capacity utilization is high, we are running it as where it's like other companies and would be everybody. So we are definitely have been but we continue and we will get all possible options for the business because we have set neither Rockwood or Kemira the long term owner of the business. But nothing has been decided to be very clear and if something happens certain we will inform that’s the only thing I can say.

Unidentified Analyst

And what are your thoughts on the Latin American bond market right now? So that the income they got the (inaudible) beginning of the year and now they are building (inaudible) Brazil. What are your thoughts on this private – is this something that you are willing or interested in investing or is it something that you are trying to avoid?

Harri Kerminen

We have been long term in South American, we have assets both in Brazil and Uruguay serving old drinks and this kind of investments in chlorines or chlorine dioxide for pulp events in case by case it's all about in those mentioned project somebody else took the project and it's the only thing I can say at the moment. So there are several still project ongoing I think we can make that and we will do something. We are not saying something we have not stepped out of the business either of the area we have invested earlier. So, wait and see.

Tero Huovinen

Are there any more questions? Well I think that concludes the conference today. Thank you for your participation and see you again in April.

Harri Kerminen

Thanks very much everybody. So thank you.

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